Odhisa TMT Price 8mm TMT 41450
Odhisa TMT Price TMT (12mm) 40150
Odhisa TMT Price 16mm TMT 40150
Odhisa TMT Price 20mm TMT 40150
Can US Steel Production Continue to Favor CLF Stock in 2019? US steel production has been on a fairly upward trend after President Trump imposed Section 232 tariffs in March. In 2018, the US produced 95 million tons of steel, the highest level since 2007. 2018 production grew 6.2% YoY. The calculations are based on the American Iron and Steel Institute’s weekly steel production data until December 29.According to the American Iron and Steel Institute (or AISI), the domestic mills produced ~1.9 million tons of steel for the week ended December 29. This production implies a surge of 13.3% compared to the production in the same week last year.Capacity utilization The capacity utilization in the US steel industry (X) is also on an upward trend, mainly due to declining imports. AISI reported that for the week ended December 29, the capacity utilization for steel mills was 81% compared to 71.9% a year ago. Import tariffs have helped the industry break above the level of 80% capacity utilization. However, with higher production and steel demand concerns from consumers, given higher steel prices in the United States (DIA), oversupply concerns have taken hold.Credit Suisse (CS) downgraded the US steel sector amid these concerns. It downgraded Cleveland-Cliffs (CLF), Nucor (NUE), and Steel Dynamics.In the next part of this series, we’ll see how tariffs are affecting US steel prices. One of the factors driving the weakness in US (IVV)(SPY) steel companies’ stock prices and Cleveland-Cliffs’s (CLF) stock price in particular is the falling domestic spot steel prices. After rising to their highest level in a decade in 2018, hot-rolled coil (or HRC) prices in the United States have started weakening. Spot HRC peaked at ~$920 per ton in July and is now trending ~22% below that level despite efforts from companies like Nucor (NUE) and ArcelorMittal (MT) to increase prices. According to Argus, the Argus US Midwest HRC index fell to $714 per ton for the week ending January 4 compared to a week earlier. Weaker demand is also negatively impacting the US steel scrap prices, which according to Argus are down by $30 to $35 per gross ton for January deliveries.After a weaker holiday period, demand is yet to take off in a significant manner to drive prices up. The recent weakness in US steel prices could also be due to weak global steel prices. Chinese steel prices have fallen ~20% from their 2018 peaks.Still supportive of earnings Even after the recent fall, steel prices remain supportive of US steelmakers and Cleveland-Cliffs (CLF). As the seasonally weaker period ends, prices seem to have bottomed out. CLF benefits from the steel price rising more quickly than domestic steelmakers.Apart from issues at home, US steelmakers are facing global concerns, especially the slowdown in China. We’ll discuss this issue in the next part of this series. China consumes more than 70% of seaborne-traded iron ore, so China’s imports are the largest factor affecting seaborne iron ore prices. According to Reuters, China’s iron ore imports fell for the first time in 2018 since 2010. The country imported 1.064 billion tons of iron ore in 2018, implying a YoY fall of 1%. In December, China’s iron ore imports came in at 86.65 million tons, implying an increase of 2.8% YoY. Its imports were almost flat sequentially.Chinese steel demand outlook is weak As the profit margins at Chinese steel mills have started to contract, restocking demand has been weak. Most market participants agree that China’s iron ore imports will increase at a very slow growth rate in the years ahead, mainly due to the high base as well as the general steel overcapacity in the country. US-China (QQQ)(MCHI) trade issues are also expected to affect the Chinese economy, which could lead to an impact on all sectors.In the next part, we’ll look at the demand indicators for China steel demand. China’s property market has been declining for the past few months. The number of cities reporting a sequential drop in prices increased for the fourth straight month in December. The average new home prices grew at a slower pace in December as compared to November.China’s automotive sales have also been on a downtrend for the past several months. Its vehicle sales for 2018 dropped 2.76% YoY to 28.08 million units. This is China’s first annual decline in vehicle sales since at least 1990. In December, its vehicle sales fell 13% YoY to 2.66 million units. Chinese steel mills are now looking forward to Chinese authorities easing policy and initiating more stimulus measures to rein in the current weakness in steel and other metal demand.Demand under pressure Due to China’s waning steel demand, its steel prices have come under pressure. The weakening Chinese steel prices have had a domino effect on global as well as US steel prices. While no one doubts that China is slowing down, the stimulus provided by Chinese authorities could drive steel prices this year. This should assuage some of investors’ concerns regarding China’s slowdown weighing on steel and iron ore demand. Thus, investors in US steel and iron ore companies (XME) like U.S. Steel (X), AK Steel (AKS), and Cleveland-Cliffs (CLF) should closely follow the policy steps taken by the Chinese government. SOUCE- https://marketrealist.com
Get free 7 Day Trial Register Now!