US steel imports
If you go through any of the US steel companies’ earnings calls extending back to the last four to six quarters, you will find one thing in common. Steel executives have been regularly pointing to the steep rise in US steel imports as the main reason for their woes. Earlier this year, top executives of United States Steel (X), Nucor (NUE), and ArcelorMittal (MT) presented their case before a team of congresspeople from major steel-producing states. In particular, they briefed the congresspeople on the surge of steel imports in the United States.
Trade cases
On their part, US steel companies have filed a series of trade cases in the last couple of years to stem the flow of imported steel products into the United States (SPY). State support for steel mills in countries like China and India has often been cited as a reason for why US steel companies find it hard to compete with them.
Challenging market
While announcing AK Steel’s (AKS) 3Q15 results, CEO James L. Wainscott said that “During the third quarter, we faced significant challenges especially in terms of pressures on carbon steel spot market selling prices, order intake rates, production volumes and shipments. And all of these challenges stem from a common and a continuing problem: imports.”
Read our series on Key Highlights from Steel Companies’ 3Q15 Earnings to learn more about what other steel companies have to say about the industry’s health.
Steel companies are not wrong in terming steel imports as their biggest challenge. US steel imports did reach alarmingly high levels in late 2014 and remained at elevated levels in early 2015.
However, steel imports have started to taper down as can be seen in the graph above. But, US steel companies’ stocks have continued to head southwards. Why is there a disconnect between falling steel imports and the performance of US steel companies? We’ll discuss that in the coming parts of the series.
Source: http://marketrealist.com/