AMERICA
US Steel Falls to 52-Week Low regardless of Trump’s Tariffs • U.S. Steel Corporation (NYSE:X) stock made an intraday low of $8.65 on Tuesday before closing marginally higher for the day. The amount was a new 52-week low for the stock and the lowest closing since the first quarter of 2016. In that quarter, the metal and mining industry fell amid concerns about China's slowdown. • This year, there are concerns about the economy of China amid the coronavirus outbreak. In 2018, President Trump imposed a 25% tariff on steel imports. The tariffs resulted in fewer imports and greater domestic production. However, Steel stocks slumped after the initial euphoria over the tariffs died down.
However, while X stock has fallen in the first quarter of 2016, domestic HRC prices are way above the current rates. Nevertheless, the company's revenue was tepid last year. The company posted a net loss in the fourth quarter. Meanwhile, X will likely post a loss in the first quarter of 2020 as well. HAVE TRUMP'S STEEL TARIFFS FAILED?
It would be easy to repudiate President Trump's tariffs as a failure. All Stocks were currently trading below the price levels when the tariffs were declared in 2018.
U.S. STEEL SHARES
U.S. steel stocks are out of favor with markets for almost two years now. Last two years, President Trump slapped a tariff of up to 25% tariff on steel imports after they were flagged as a national security risk by the Department of Commerce.
While the general steel market has been weak, X's underperformance stands out. The company closed with losses last year, although its peers ended the year well. Thus far, the company's stock lost 22.6% in 2020 based on the prices yesterday. Remarkably, the stock hit a fresh new 52-week low in yesterday's trade. Currently, the stock is trading at its lowest level since the first quarter of 2016.
As soon as the tariffs were declared, steel stocks increased sharply. However, as 2018 progressed, they came under pressure.
CHINA FACTOR
Each one of the top steel stocks closed in 2018 with massive losses. The stocks underperformed broader markets in 2019. The mining and metals sector has been weak this year amid the coronavirus outbreak.
In the first quarter of 2016, there was a downturn in the metals and mining industry amid concerns regarding China's slowdown. Domestic spot HRC (hotrolled coil) prices fell below $400 per ton in what was a cyclical low for the global steel industry.
6 | SKILLINGS MINING REVIEW March 2020
However, domestic steel production has improved over the last two years. Imports are remarkably running near multi-year lows. Thus, President Trump's tariffs have resulted in importing substitution. For stock prices and steel prices of domestic mills, a lot of factors are at play, including global factors. CAN U.S. STEEL STOCKS BOUNCE BACK?
Earlier this year, I noted that steel might be a contra play this year. However, Uncertainty on account of the Coronavirus changed the picture. Currently, the Coronavirus is threatening the Chinese economic recovery. Because of this, metal and mining stocks have dropped this year. Can steel stocks recover back? We'll have to see how soon the Coronavirus gets contained and what steps the government takes to improve the domestic economy. Meanwhile, Steel Dynamics (NASDAQ: STLD) could offer some value at the current price point.
