The quotations of the US metallurgical companies rose sharply on Tuesday. The Trump administration has postponed tariffs on some Chinese goods until December. Previously, Chinese goods worth $ 300 billion were planned to be levied with a 10 percent duty starting in September. However, the beginning of August proved to be fatal for the American steel companies. Based on Monday's close prices, US Steel (X) and AK Steel (AKS) are down 22.4% and 15.8% this month, respectively. Nucor (NUE) and Steel Dynamics (STLD) fell 9.3% and 13.1%, respectively. IOUs (SPDR) Mining ETF (XME) lost 8.7% in August. US Steel, Nucor and Steel Dynamics trade at 1 year loss. However, AK Steel is still in the growth zone throughout the year. All of these steel companies closed with losses last year despite President Trump's import tariffs.
The state of metallurgical companies is associated with steel prices. Steel prices in the US began to fall in the second half of 2018. The fall in US steel prices has accelerated this year. US Steel announced the closure of its US plant in June. Ironically, the company made the announcement on the same day President Trump launched his 2020 election campaign. Nonetheless, state steel companies posted price increases three times in a row, within a short span. Steel stocks also rallied and followed the rise in steel prices. However, the escalation of the trade war affected the fragile recovery of steel companies.
Trade War
The US-China trade war escalated in August. The United States announced that China is a "currency manipulator." According to S&P Global Platts, the American Iron and Steel Institute has backed accusations of China as a currency manipulator. The US steel industry also welcomed section 232 tariffs last year. However, the shares of metallurgists continue to fall despite the tariffs. China's economic growth has slowed. Chinese steel prices also weakened. Steel prices in the US are unlikely to rise amid weak global macros. There was a relative calm in the US-China trade war in June and July. Consistently low supply chain inventories have helped US steel companies drive higher prices.
Shares of US steel companies fell sharply in May amid the escalating US-China trade war. President Trump raised tariffs on Chinese goods by $ 200 billion from 10% to 25% in May. While US steel companies initially benefited from Section 232 tariffs, US steel prices were well below pre-tariff levels. Even the fall in Chinese steel exports and the decline in US steel imports did not affect investor sentiment. The entire metallurgical sector and mining space may remain volatile amid the uncertainty of the trade war. Today's price action is a great example of how the news of a trade war can push steel stocks up or down.
