No reprieve for U.S. steel makers yet as imports of cheap steel continue to flood American shores despite a string of punitive trade actions (in the form of heavy tariffs). Steel imports have shot up roughly 19% 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 19.4% year over year to roughly 32.9 million net tons through the first ten months of 2017. Finished steel imports for the same period also increased 15.4% to around 25.4 million net tons. Year to date, finished steel import market share is estimated at 28%, which is 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 231%), line pipe (up 68%), standard pipe (up 44%), mechanical tubing (up 34%), cold rolled (up 26%), sheets & strip all other metallic coatings (up 25%), hot rolled bars (up 21%) and sheets & strip hot dipped galvanized (up 17%).
The biggest offshore suppliers for the ten-month period were South Korea with 3,328,000 net tons (up 2% year over year), Turkey with 2,065,000 net tons (down 1%), Japan with 1,307,000 net tons (down 17%), Taiwan with 1,148,000 net tons (up 35%) and Germany with 1,160,000 net tons (up 14%).
Imports Remain a Pressing Problem
Notwithstanding a raft of stringent trade actions and threats of further future measures, imports continue to flow into the U.S. market due to foreign producers’ overcapacity.
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 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 6% year over year through the first ten months of 2017. However, imports from other countries such as Russia, Taiwan, Germany, South Korea and Brazil have spiked over this period.
A surge in steel imports put pressure on U.S. steel prices during the third quarter. Continued import pressure has not allowed steel pricing to keep pace with higher raw material costs during the quarter.
Can Section 232 Bring Respite?
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. The Section 232 probe is aimed at determining whether the imports pose a threat to national security and also gives the President the power to impose broad tariffs or quotas on imported steel.
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. U.S. Commerce Secretary Wilbur Ross in an interview told Bloomberg in September that a decision on steel tariffs has been delayed until after the completion of the tax reform.
The U.S. Department of Commerce 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.
Nevertheless, 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.”
Both Nucor and U.S. Steel currently carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
While the findings from the Section 232 steel investigation are due, a positive outcome from the probe will give the Trump administration the opportunity to take broad-based trade actions against cheap imports. This would provide a significant thrust to steel prices and give domestic steel makers more pricing power.
Investor Alert: Breakthroughs Pending
A medical advance is now at the flashpoint between theory and realization. Billions of dollars in research have poured into it. Companies are already generating substantial revenue, and even more wondrous products are in the pipeline.
Cures for a variety of deadly diseases are in sight, and so are big potential profits for early investors. Zacks names 5 stocks to buy now.
Click here to see them >>
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