Quantcast

U.S. Steel Imports Up 18% YTD: Can Section 232 Bring Relief?


Shutterstock photo

Imports of cheap steel continue to make inroads into the American market despite a raft of stringent trade actions and threats of further future measures. Steel imports have spiked roughly 18% year to date - according to a recent report from the American Iron and Steel Institute (AISI), an association of North American steel makers.

Per AISI, based on preliminary U.S. Census Bureau data, total U.S. steel imports went up 17.5% year over year to roughly 35.6 million net tons through the first eleven months of 2017. Finished steel imports for the same period also increased 14.3% to around 27.6 million net tons. Year to date, finished steel import market share is estimated at 27%, which is still higher than 26% clocked in full-year 2016.

Major finished steel products that have showed a significant year-to-date increase in imports on a year-over-year basis include oil country goods (up 223%), line pipe (up 69%), standard pipe (up 41%), mechanical tubing (up 31%), hot rolled bars (up 25%), sheets & strip all other metallic coatings (up 21%), cold rolled sheets (up 18%) and sheets & strip hot dipped galvanized (up 15%).

The biggest offshore suppliers for the eleven-month period were South Korea with 3,558,000 net tons (up 0.4% year over year), Turkey with 2,133,000 net tons (down 6%), Japan with 1,422,000 net tons (down 16%), Germany with 1,301,000 net tons (up 18%) and Taiwan with 1,204,000 net tons (up 29%).

Imports Remain a Pressing Problem

The continued surge of steel imports into the United States has hollowed out much of the domestic steel industry. U.S. steel producers including Nucor Corp. NUE , United States Steel Corp. X , AK Steel Holding Corp. AKS , Steel Dynamics, Inc. STLD and Commercial Metals Co. CMC have raised concerns about a renewed flood of subsidized imports this year.

While the U.S. Department of Commerce has made several ruling imposing duties on additional steel products since the start of 2017, imports continue to flow into the domestic market due to foreign producers' overcapacity. These cheap imports are hurting the margins of American steel players.

Although positive rulings in trade cases (resulting in levy of heavy tariffs) against China last year led to a decline in Chinese steel exports to the United States, imports from other countries remain at above historical levels.

According to AISI data, steel imports from China fell roughly 5% year over year through the first eleven months of 2017. However, imports from other countries such as Germany, Taiwan, Brazil and South Korea have spiked over this period.

All Eyes on Section 232

U.S. steel makers continue to pin their hopes on President Trump imposing new restrictions on imported steel. The Trump administration, in April 2017, ordered an investigation under Section 232 of the Trade Expansion Act of 1962 aimed at determining whether the imports pose a threat to national security.

However, the Trump administration has delayed the release of the report on the Section 232 probe, which was initially expected at the end of June 2017. The Commerce Department has until mid-January 2018 to conclude the investigation. A delay in the Section 232 probe has triggered a spike in steel imports into the American market in the recent months.

Major U.S. steel makers such as Nucor, U.S. Steel and AK Steel remain optimistic about the Section 232 investigation. Nucor's Chief Financial Officer, Jim Frias, in the third-quarter earnings call, said that he remains confident that President Trump will fulfil his commitments to the steel industry. Moreover, U.S. Steel's CEO, David B. Burritt, during third-quarter call, said that "We're still fairly optimistic that 232 will have a meaningful impact on the continued unfair trade practices that are harming domestic steel."

Nucor currently carries a Zacks Rank #4 (Sell) while U.S. Steel is a Zacks Rank #3 (Hold) stock. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

As the deadline for the probe approaches, a positive outcome will give the Trump administration the opportunity to take broad-based trade actions (in the form of tariffs or quotas) against cheap imports. This would provide a significant thrust to steel prices and give domestic steel makers more pricing power.

Today's Stocks from Zacks' Hottest Strategies

It's hard to believe, even for us at Zacks. But while the market gained +18.8% from 2016 - Q1 2017, our top stock-picking screens have returned +157.0%, +128.0%, +97.8%, +94.7%, and +90.2% respectively.

And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - Q1 2017, the composite yearly average gain for these strategies has beaten the market more than 11X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.

See Them Free>>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

AK Steel Holding Corporation (AKS): Free Stock Analysis Report

Steel Dynamics, Inc. (STLD): Free Stock Analysis Report

United States Steel Corporation (X): Free Stock Analysis Report

Nucor Corporation (NUE): Free Stock Analysis Report

Commercial Metals Company (CMC): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Investing , Business , Stocks
Referenced Symbols: AKS , STLD , X , NUE , CMC



More from Zacks.com

Subscribe






Zacks.com
Contributor:

Zacks.com

Equity Research










Research Brokers before you trade

Want to trade FX?