US Steel Imports Tumble, So Does U.S. Steel Stock!

    • US steel imports fell sharply in December 2019. Last year, imports fell to the lowest level since 2010. However, the fall hasn’t brought any respite for U.S. Steel Corporation (NYSE:X) stock.
    • U.S. Steel stock has been on a selling spree. Notably, the stock fell sharply in 2018 and 2019. So far, U.S. Steel stock is trading down 20% in 2020. While domestic steel mills have sought to portray allegedly unfairly traded steel products as their biggest woes, we see a disconnect between imports and U.S. Steel’s stock price.

    Steel imports fell

    According to preliminary data released by the Department of Commerce, US steel imports fell almost 18% in December. Overall, the imports fell 17% last year to the lowest level since 2010. In 2010, the US economy was still recovering from the 2008–2009 financial crisis. Imports fell in 2018 as well. In 2018, President Trump slapped a 25% tariff on steel imports. Imports have fallen gradually since then. The tariffs have made it expensive and in some cases not economical to import steel from foreign countries.

    U.S. Steel stock continues to tumble

    In the United States, steel companies welcomed President Trump’s tariffs. In the past, they blamed allegedly subsidized steel imports for their woes. U.S. Steel restarted two blast furnaces in 2018. President Trump visited the facility to highlight how his tariffs helped the US manufacturing sector. However, despite the tariffs, the company’s stock fell almost 50% in 2018. The slide in U.S. Steel stock continued last year. Overall, the company underperformed its peers. Some of the blame lies with the company’s management as well. However, other steel stocks have also sagged despite President Trump’s tariffs.

    President Trump’s steel tariffs

    In 2018, President Trump imposed a 25% tariff on US steel imports. The Department of Commerce said that steel imports were a national security threat. The tariffs were adjusted multiple times and several countries got an exemption. The most notable exception was for Canada and Mexico, the top two steel exporters to the US. President Trump increased and decreased tariffs on Turkish steel imports several times over the last two years. Turkey was a leading rebar exporter to the US before the tariffs. Rebar is used in non-residential construction.

    US versus global steel production

    Meanwhile, falling steel imports led to import substitution. Last year, US steel production rose 1.5% year-over-year to 87.9 million metric tons, according to the World Steel Association. Over the last few months, production has fallen on a yearly basis. The annual data show a rise. Production rose sharply in the first half of the year. Overall, US production growth lagged the global rate by a considerable margin last year.

    Why are US steel stocks falling in 2020?

    The current slide in US steel stocks is mainly due to concerns about the coronavirus. Since the deadly disease is mainly in China, the largest metal consumer, metal and mining companies’ stock prices have fallen. Metal stocks are hypersensitive to developments related to China. Notably, the US and China trade war also took a toll on metal prices. While metal stocks recovered somewhat after phase one of the US and China trade deal, they have come under pressure amid uncertainty about the coronavirus.

    President Trump’s tariffs have helped bring down imports. However, looking at U.S. Steel’s stock price, it seems that imports weren’t the biggest nemesis for the domestic steel industry. Warren Buffett’s words of wisdom might help explain the situation. In his annual shareholder letter last year, Buffett wrote, “There are also many other countries around the world that have bright futures. About that, we should rejoice: Americans will be both more prosperous and safer if all nations thrive.”

    U.S. Steel’s fourth-quarter earnings

    Despite the tariffs, the US and China trade war and global slowdown hit the US steel industry. Now, uncertainty about the coronavirus is taking a toll on metal and mining names, including U.S. Steel stock. The company will likely release its fourth-quarter earnings on January 30 after the markets close. Last month, while the company released its guidance, U.S. Steel said that it expects to post a negative EBITDA in the quarter. However, the fourth-quarter guidance might be a bit conservative. Read Is U.S. Steel Stock a ‘Buy’ Before Its Q4 Earnings? to learn more.