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US Steel market outlook darkens - Morningstar-The 19th China(Guangzhou)Int’l Metal &Metallurgy Exhibition
7/27/2017 steel expo-metal &metallurgy expo |
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While the steel market still awaits the US Commerce Department’s findings under
its Section 232 investigation, Morningstar has issued a downbeat outlook for the
steel market, and the value of American steel companies.
Morningstar analysts are pessimistic on steel. In a note, they said that “Trump‘s
protectionist leanings, highlighted by an announced investigation into whether
high volumes of imported steel represent a threat to U.S. national security, have
proved to be a boon to steelmaker stock prices in 2017. We contend that weak
fundamentals will eventually win out, however, as substantial global overcapacity
and decelerating fixed-asset investment in China will weigh on steel prices. As
Chinese stimulus measures have tapered, so have steel and steelmaking raw
material prices. In the near term, US steelmaker profits should remain attractive,
but we see tougher times ahead. Based on our outlook, every U.S. steelmaker we
cover is trading above fair value.”
US steelmakers have benefited from the recovery in steel prices that started in
2016, but the steel price rally and the benefit it has spread to steelmakers has
stalled. The thought is that further, tougher sanctions are necessary in order for
another rally in steel prices. Even though this is what is required, there are doubts
over what the long term impact of tighter trading regulations will be if they are
implemented.
If the Commerce Department does find that cheap steel imports are a matter of
national security, and if Donald Trump implements sweeping trade reforms, it is
very likely these moves will be met with a WTO complaint, and that could dilute their positive impact on steel prices.
-The
19th China(Guangzhou)Int’l Metal &Metallurgy Exhibition
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