uploads///US steel stocks

US Steel Stocks: Bleak Guidance Masks Infrastructure Push

By

Jun. 18 2020, Updated 7:43 a.m. ET

  • Earlier this week, US steel stocks rose sharply amid reports that the Trump administration is weighing a $1 trillion infrastructure stimulus plan.
  • However, the sector was in the red on Wednesday. U.S. Steel Corporation (NYSE:X) gave bleak guidance for the second quarter. The company projected a wider-than-expected loss.
Article continues below advertisement

US steel stocks

US steel stocks were the frontrunners in the “Trump trade.” The term refers to a sharp rise in some stocks after President Trump’s surprise 2016 election win. President Trump made good his promise to clamp down on steel imports. In 2018, he imposed a 25% tariff on the imports. President Trump also imposed a 10% tariff on US aluminum imports. During his 2016 campaign, President Trump floated the idea of a trillion-dollar investment in infrastructure. Investing in infrastructure lifts the demand for metals like aluminum and copper.

Trump’s infrastructure stimulus push

While President Trump has made good on several of his promises, the proposed infrastructure investments are a missing piece. Earlier this week, there were reports that the Trump administration is weighing a $1 trillion infrastructure stimulus bill. The metals and mining sector, including US steel stocks, rallied on the news. Previously, Nucor (NYSE:NUE) said that President Trump’s $1 trillion infrastructure investments could generate annual incremental demand steel demand of 5 million tons. The amount is roughly 5% of the pre-pandemic demand. Read How Nucor Could Gain from Infrastructure Investments to learn more. Nucor will likely release its second-quarter guidance this week. The company’s business model stands out from its peers.

Article continues below advertisement

U.S. Steel’s earnings guidance looks bleak

On Wednesday, US steel stocks closed in the red. While the sell-off in the broader markets was among the reasons, the company’s bleak second-quarter guidance might have added fuel to the fire. The company expects a second-quarter adjusted EBITDA of -$315 million. X expects to post an adjusted net loss of $3.06 per share. The projected loss was wider than what the markets expected.

X stock

US steel companies have announced several rounds of price hikes. However, the price hikes haven’t been fully effective. The hot-rolled coil price is still languishing near $500 per ton. X’s rank among global steel companies continues to fall. Read U.S. Steel: Past Success, Current Scenario, and Uncertain Future to learn more.

Advertisement

More From Market Realist

  • Steel coils at a X plant
    Basic Materials
    U.S. Steel Stock (X) Could Rise More Amid Commodity Supercycle
  • New home construction
    Basic Materials
    How Investors Can Play Surging Lumber Prices in 2021
  • MP Materials mine
    Basic Materials
    MP Materials (MP) Is an Attractive Play on Rare Earths
  • Woman looking at data
    Basic Materials
    Should You Buy SLV Stock Before Another Silver Short Squeeze?
  • CONNECT with Market Realist
  • Link to Facebook
  • Link to Twitter
  • Link to Instagram
  • Link to Email Subscribe
Market Realist Logo
Do Not Sell My Personal Information

© Copyright 2021 Market Realist. Market Realist is a registered trademark. All Rights Reserved. People may receive compensation for some links to products and services on this website. Offers may be subject to change without notice.