How Would A Tougher Stance On Unfairly Traded Steel Imports Impact U.S. Steel’s Stock?
U.S. Steel’s stock rallied nearly 23% by close of trading on Friday from its closing price on Tuesday, driven by the outcome of the U.S. Presidential election. [1] President-elect Trump has been quite vocal in his opposition to unfairly traded steels from China as well as unfair trade in general, which boosted market sentiment pertaining to U.S. steel companies last week post the announcement of the election results. [2] U.S. trade authorities have already imposed anti-dumping and countervailing duties earlier this year on a range of steel imports from various countries in response to petitions filed by the domestic steel industry, which is expected to provide a boost to steel prices in the U.S. going forward. See our forecast for U.S. Steel’s U.S. Flat-rolled average realized steel prices:
Given President-elect Trump’s stand on unfairly traded steels, the markets expect even tougher trade-related regulatory action going forward. Whereas the exact steps that the new administration intends to take pertaining to this issue will become clearer in the coming months, we have tried to estimate the impact of a more favorable business environment for steel companies as a result of a tougher stand against steel imports on U.S. Steel’s stock price. In this scenario, we assume that the realized price for the Flat-rolled division reaches $1000 per ton by the end of our forecast period, as compared to $924 per ton in the base case.
See our forecast for U.S. Flat-rolled steel average realized prices in this scenario here
We have also upped our margin expectations for the Flat-rolled division by around 300 basis points by the end of the forecast period in order to account for the revised pricing forecasts. When we factor in the revised forecasts into our model, the new scenario represents a 34% upside to our price estimate in the base case. Thus, if the President-elect follows through on his electoral promises, it could significantly improve U.S. Steel’s business prospects.
See our complete analysis for the Tougher Stance Against Unfair Steel Imports scenario here
Have more questions about U.S. Steel? See the links below.
- What Is U.S. Steel’s Revenue And EBITDA Breakdown?
- What Is U.S. Steel’s Fundamental Value Based On Expected 2015 Results?
- How Has U.S. Steel’s Revenue Composition Changed Over The Last 5 Years?
- By What Percentage Did U.S. Steel’s Revenue & EBITDA Change In The Last 5 Years?
- By What Percentage Can U.S. Steel’s Revenue & EBITDA Grow In The Next 3 Years?
- How Has The Increase In Steel Imports To The U.S. Impacted U.S. Steel’s U.S. Flat-Rolled Steel Operations?
- How Has The Decline In Oil Prices Impacted U.S. Steel’s Tubular Steel Shipments?
Notes:
- Can U.S. Steel Stock Return To Pre-Inflation Shock Highs?
- What’s Happening With U.S. Steel Stock?
- Will U.S. Steel Stock Continue To Outperform Despite Economic Headwinds?
- Is U.S. Steel Set For Tough Q3 Results?
- Why We Are Cutting Our Price Estimate For U.S. Steel Stock
- How Will U.S. Steel Stock Fare In An Uncertain Economy?
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Notes:- U.S. Steel Stock Price, Google Finance [↩]
- China braces for steel backlash from US and EU, Financial Times [↩]