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US Steel Industry Has Plenty of Bad News for Trump

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Aug. 26 2019, Published 9:06 a.m. ET

  • The US steel industry might have plenty of bad news for President Trump. The US steel production and capacity utilization ratios have fallen. New investments have been put on hold. There have been some layoffs as well.
  • US steel stocks including U.S. Steel, AK Steel, and Nucor have fallen sharply in August.
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US steel industry

Protecting the US steel industry was among the Trump administration’s key priorities. Last year, President Trump approved a 25% tariff on US steel imports. The administration hoped that the tariffs would give US steel companies a level playing field. Initially, the tariffs propelled US steel companies’ stock prices. There was a wave of new investments and restarts. Last year, US steel production also rose, while imports fell. Despite seemingly strong fundamentals, companies like U.S. Steel (X), AK Steel (AKS), and Nucor (NUE) closed with losses last year.

Things have changed this year

Last year, the US steel industry gave President Trump a lot of good news. President Trump visited U.S. Steel’s Granite City facility last year after the company announced a restart. However, over the last few months, the US steel industry hasn’t had much good news for President Trump. In June, U.S. Steel announced the partial closure of two of its US blast furnaces. In August, U.S. Steel’s regulatory filings showed that it plans to fire some workers in Michigan.

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US steel industry and layoffs

U.S. Steel announced the closure of a tin mill. ArcelorMittal (MT) also announced the closure of a tin mill. Both of the closures would lead to more layoffs. Notably, the layoffs are coming shortly after President Trump claimed that the US steel industry is “thriving” under his administration.

US steel industry’s capacity utilization falls

According to the American Iron & Steel Association, the US steel industry’s capacity utilization fell to 79.8% in the week ending August 17. That week, US steel production fell on a weekly and yearly basis. Incidentally, the Department of Commerce intended to increase the US steel industry’s capacity utilization ratio above 80% through the Section 232 tariffs. While US steel production and capacity utilization ratios rose last year, they started to falter over the last few months.

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Where are the new investments?

JSW Steel USA has also put a planned expansion on hold. On August 20, S&P Global Platts said, “While JSW USA is fully underway in modernizing the plate mill at Baytown, Texas, given the current market conditions and the prevailing policy environment, the company has for now decided to put on hold the backward integration project of installing an electric arc furnace and slab caster at Baytown.”

However, the steel industry isn’t all gloom and doom. JSW Steel is still ramping up operations at other sites. Recently, Australia’s BlueScope Steel committed $1 billion towards US operations. Australia was among the first countries to get a Section 232 exemption last year.

US steel stocks

US steel stocks are having a hard time in August. U.S. Steel (X), AK Steel (AKS), and Nucor (NUE) have fallen 25.3%, 23.0%, and 13.7%, respectively. All of these stocks are trading with a year-to-date loss. However, broader US market indices are still in the green for the year. Looking at US steel stocks’ price action, markets don’t seem to be buying President Trump’s belief that the US steel industry is “thriving.”

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