Dump These 3 Steel Stocks as Tariff's Rip Up the Industry


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Dump These 3 Steel Stocks as Tariff’s Rip Up the Industry

INVESTING STRATEGIES, STOCKS TO AVOID, U.S INVESTMENTS
 

The imposition of a 25% tariff on imported steel by President Trump has certainly been a headline grabber. But it obscures the long-term problems faced by the U.S. steel industry.

And it only addresses one side of the classic economic equation for any commodity – supply and the industry’s struggle against cheap imports. The share of the U.S. steel market taken by imports was only 26.9% in 2017, up slightly from 2016’s level of 25.4%.

The other part of the equation is demand and that remains a sore spot. There is a genuine long-term weakness in domestic demand for steel. The only bright spots on that front are the auto and the shale oil and gas industries.

Related: Trump’s Trade War Set to Cost This Automaker $1 Billion: Sell Now

The decline in U.S. steel output since the 1970s is clearly seen in this graph. 2017 estimated steel use in the U.S. was 110 million metric tons, which was far below the 136 million ton level in 2006, before the financial crisis. U.S. steel production was up 3% in 2017, but capacity utilization remains low at 74%. In other words, there is still overcapacity in the U.S. steel industry based on current demand.

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