Improved Steel Demand Outlook Drives Revision In U.S. Steel Price Estimate To $31
The outcome of the U.S. presidential election has been a favorable development for the domestic steel industry. President-elect Trump’s policies have altered the outlook for steel demand over the next few years. The President-elect has outlined his plans for a massive $550 billion overhaul of the nation’s infrastructure, with a focus on transportation infrastructure such as roads, bridges, and railways. [1] This is expected to spur the demand for steel over the next few years, benefiting the domestic steel industry.
In addition to the impetus to domestic steel demand from an increase in infrastructure spending, the incoming administration has also promised to protect the domestic steel industry from unfairly-traded steel imports. [2] Competition from cheap steel imports has adversely impacted the prospects of domestic steel producers over the past few years, leading to a decline in production and capacity reduction for the likes of U.S. Steel. U.S. authorities levied antidumping duties earlier this year on steel imports from a number of countries including major exporters such as South Korea and China. The incoming administration has vowed to continue the campaign to create a level playing field for domestic steel producers. This should provide a more favorable pricing environment for steel in the U.S., benefiting domestic producers that have witnessed declines in steel prices over the past few years.
Considering the changes to the outlook for steel demand and pricing in the wake of the presidential election, we have revised our shipment forecast for the U.S. Flat-rolled division. The following graph illustrates our new forecast, which represents a 10% increase in shipments by the end of our forecast period, as compared to our previous forecast.
We have also revised our pricing forecast for the division, as a result of the expectations of a more level playing field vis-a-vis steel imports for domestically produced steel as well as higher demand for the same. The following graph illustrates our new pricing forecast for the U.S. Flat-rolled division, which represents a 5% increase by the end of our forecast period, as compared to our previous forecast.
We have also suitably modified our margin forecasts for the U.S. Flat-rolled division corresponding to the changes in our pricing and shipment estimates. The changes to our estimates have translated into our new $31.03 price estimate for the company’s stock.
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- Why We Are Cutting Our Price Estimate For U.S. Steel Stock
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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?
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Notes:
- Transportation & Infrastructure, www.greatagain.gov Trump Transition Website [↩]
- How Trump’s China Trade War Could Play Out: QuickTake Q&A, Bloomberg [↩]