US Steel Stocks Surge, China Tariffs Delayed

US steel stocks are in the red in August. Steel stocks recovered in June and July after falling to 52-week lows in May.

US steel stocks

US steel stocks have risen sharply on Tuesday. The Trump administration has delayed the tariffs on some Chinese products until December. Previously, $300 billion worth of Chinese goods were supposed to attract a 10% tariff starting in September. However, August has been somber for steel companies. Based on Monday’s closing prices, U.S. Steel (X) and AK Steel (AKS) have fallen 22.4% and 15.8%, respectively, this month. Nucor (NUE) and Steel Dynamics (STLD) have fallen 9.3% and 13.1%, respectively. The SPDR S&P Metals and Mining ETF (XME) has lost 8.7% in August. U.S. Steel, Nucor, and Steel Dynamics are trading with a year-to-date loss. However, AK Steel is still in the green for the year. All of these steel companies closed with losses last year despite President Trump’s Section 232 tariffs.

Why have US steel stocks fallen?

Steel companies’ fortunes are linked to steel prices. US steel prices started to fall in the second half of 2018. The fall in US steel prices increased this year. U.S. Steel announced plant closures in June after spot steel prices fell. Ironically, the company made the announcement the same day that President Trump started his 2020 reelection campaign. We saw some momentum in US steel prices in June and July. US steel companies announced price hikes three times. Steel companies’ stock prices also gained traction and followed steel prices higher. However, the escalating trade war impacted steel companies’ fragile recovery.

Trade war

The US-China trade war has escalated in August. The US declared that China is a “currency manipulator.” According to S&P Global Platts, the American Iron and Steel Institute supported the move to designate China as a currency manipulator. The US steel industry also welcomed the Section 232 tariffs last year. However, steel stocks continue to sag despite the tariffs. China’s economic growth has slowed down. Chinese steel prices have also been weak. US steel prices probably won’t rise amid weak global macros. In June and July, there was relative calm in the US-China trade war. The calm and low supply chain inventories helped US steel companies push for price hikes.

Steel stocks fell in May

Steel stocks fell sharply in May amid the escalating US-China trade war. President Trump increased tariffs on $200 billion of Chinese goods from 10% to 25% in May. While US steel companies initially benefited from the Section 232 tariffs, US steel prices are way below the levels before the tariffs. Steel stocks are trading at a fraction of what they did before the Section 232 tariffs. Even falling Chinese steel exports and lower US steel imports didn’t lift US steel stocks. The entire metal and mining space could remain volatile amid trade war uncertainty. Today’s price action is a perfect example of how trade war news can move steel stocks.