It's Not Too Late To Shop For A Basket Of Steel

Mar. 09, 2016 3:57 AM ETAKS, CLF, SCHN, STLD, X1 Comment
John Morgan profile picture
John Morgan
63 Followers

Summary

  • New anti-dumping duties on foreign steel makers are leveling the domestic playing field for the first time in years.
  • Domestic steel companies are already leaner following extended retrenchments in costs and plant closings.
  • Negative operating margins should improve; their heavy debts should ease.

The lumbering U.S. steel industry could be laying the foundation for a renaissance of sorts, thanks in no small part to federal trade officials who finally cracked down on evidence of massive dumping by China and other foreign producers.

The shares of some of the major U.S. producer stocks wasted no time in vaulting skyward following the stiff tariffs announced March 1 by the Department of Commerce. But there appears still to be ample room for more upside in domestic steel's prospects in coming months.

More Foreign Dumping Protection In Wings

For starters, the new DOC anti-dumping duties apply only to cold-rolled steel. The preliminary duty orders amount to 266% on China, with lesser amounts on Japan (71%), Brazil (39%), India, Korea, Russia and the UK.

A second steel trade case pending with the DOC alleges dumping of hot-rolled steel by some of the same nations, with a final determination expected in late May. Yet a third case alleges dumping and subsidization of corrosion-resistant steel into the U.S. by foreign producers, also with a likely May decision.

Altogether, foreign producers captured an estimated one-third of the domestic steel market in 2015, according to the United Steelworkers. With domestic producers suddenly competitive again from a pricing standpoint, their gains should be compelling.

Stocks to consider here include United States Steel (NYSE:X), AK Steel (NYSE:AKS), Steel Dynamics (NASDAQ:STLD), Schnitzer Steel (NASDAQ:SCHN) and Cliffs Natural Resources (NYSE:CLF). Cliffs is not actually a steel producer, but rather a supplier of iron-ore pellets to the North American steel industry - thus, it should see a smart pickup in demand from its newly revitalized customers.

More Share, Higher Prices

The steel names listed should all be able to pick up some U.S. market share, and some experts believe domestic steel prices may continue to rise in coming months.

This article was written by

John Morgan profile picture
63 Followers
John Morgan is the owner of Plaza Media Partners II. He is a journalist and media executive who began his career at United Press International (UPI) and Cable News Network (CNN). He has been a contributor to a range of financial news outlets including Newsmax's Moneynews.com, Midnight Trader, Street Authority, StockViews and MarketGrader. Morgan was the founder of the Entertainment News Wire and several prominent media sites including Adweek.com, Mediaweek.com and Billboard.com. He has held management positions at two successful VC-backed portfolio companies and is an active trader.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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