Tariffs, a manufacturing slump and the steel industry

Falling Demand

During his election campaign, Trump repeatedly promised he would revive the steel industry through trade war measures primarily aimed at imports from China and Europe. The tariffs at first sent steel stock prices up in anticipation of higher profits.

But these protectionist measures have had the opposite effect. Steel giants like U.S. Steel, Nucor, and ArcelorMittal all brought additional domestic capacity on line in anticipation of greater demand. While demand rose modestly earlier on, the additional capacity led to a situation of overproduction in the U.S. market, with the ultimate result of falling steel prices.

And it’s not just steel prices that have fallen of late; so have stock prices of publicly held steel concerns. Nucor has seen its share value fall by over 20% since its early-2018 high. ArcelorMittal’s stock has fallen by well over 50%, from a high of $37.50 in January 2018 to just $16.00. U.S. Steel has dropped from a 52-week high of $28 to around $13.50 recently.

Those numbers may be good news for investors, who may find shares in the steel sector cheap enough to be worth taking the plunge and buying. But the numbers on the whole do not bode well for the steel sector anywhere, unless and until the impediments to the international trading system are fixed.