U.S. Steel Companies Show Strong First Quarter, Praise 'Buy American' Policies

Researched by Industrial Info Resources (Sugar Land, Texas)--For the first quarter of 2017, U.S. steelmakers reported generally favorable earnings results. After suffering years of China and other countries dumping steel into the U.S. market, tariffs on imported steel from certain locations for certain products have been put in place. In May 2016, the U.S. dramatically hiked tariffs on Chinese cold-rolled steel, which is used from everything from cars to appliances. In March 2017, the U.S. Commerce Department announced preliminary tariffs on imports of rebar from Japan, Taiwan and Turkey, and in April, President Donald Trump launched a probe into whether imports of foreign steel pose a risk to national security. Trump also has issued a "Buy American" directive in which users of certain products and raw materials, including steel, are purchased from U.S. producers. Industrial Info is tracking more than 250 projects valued at $10.1 billion at U.S. steel facilities.

Among the companies praising the Trump administration's "Buy American" policies was United States Steel Corporation (NYSE:X) (Pittsburgh, Pennsylvania), which narrowed its quarterly loss from $340 million in first-quarter 2016 to $180 million in first-quarter 2017. Speaking of the signing of Trump's executive order investigating steel imports, former Chief Executive Officer Mario Longhi, who stepped down as CEO earlier this week, said: "For too long, China, Korea and other nations have been conducting economic warfare against the American steel industry by subsidizing their steel industries, distorting global markets and dumping excess steel into the United States. Tens of thousands of workers in the American steel industry, the industry's supply chain and the communities in which our industry operates have lost their jobs due to unfair and illegal practices by foreign producers. ... This melted and poured standard, or what we call 'mined, melted and made,' has been successfully applied since 1983 and must continue to be the standard using federal 'Buy American' rules for steel procurement. We applaud the president for affirming his commitment to full and effective enforcement of our laws and to addressing the issue of unfairly dumped and subsidized steel."

Also seeing benefits of an increasing crackdown on imported steel is Nucor Corporation (NYSE:NUE) (Charlotte, North Carolina). The company reported first-quarter 2017 net income of $356.9 million, compared with $87.6 million in first-quarter 2016. In a conference call regarding the company's performance, Chief Financial Officer Jim Frias said that although the amount of steel dumped on the U.S. market was diminishing, imports still hovered at a 25% share of the U.S. market. "While significant progress is being made, there is still a significant amount of work to be done," said Frias.

AK Steel Holding Corporation (NSYE:AKS) (West Chester, Ohio) reported first-quarter 2017 net income of $62.5 million, the company's highest first-quarter net income since 2008. In the company's conference call, Chief Executive Officer Roger Newport said, "As we entered 2017, we continued our fight for fair trade in the steel industry in the United States. We must have a level playing field and our trade laws must be enforced. We want to thank the Trump administration for making a major move towards leveling the playing field for the steel industry in the United States."

Newport said that a broader strategy was needed rather than simply placing tariffs on specific countries for specific products. "The current global oversupply of steel and resulting flood of cheap imports have not and cannot be addressed by traditional trade cases alone. While those cases have had positive effects, they are limited in scope to only certain products and certain countries. This creates opportunities for offending countries to work around the trade case orders by making only slight modifications to products or shipping through non-named countries," he said.

Steel Dynamics Incorporated (NSYE:STLD) (Fort Wayne, Indiana) also reported significantly higher earnings. The company's first-quarter 2017 net earnings were $201 million, compared with $63 in the same quarter of the previous year. In the company's quarterly earnings call, CEO Mark Millet said the earnings were primarily driven by the company's flat roll group, in which demand was strong and imports were down year-over-year for the quarter. Millet still urged caution when it came to imports for the industry. "It should be noted, though, that despite hot-rolled coil imports being down considerably, cold-rolled sheet and coated were up materially year-over-year. Additionally, pipe and tube imports grew over 35% in the quarter."

Decreased imports and President Trump's "Buy American" policy could potentially open the door for further developments in the steel sector. Among the largest U.S. steel mill projects being tracked by Industrial Info is E-United Group's (Taiwan) planned grassroot carbon and stainless steel mill near the Gulf of Mexico. The company continues with the site selection process, with one possible site being near Corpus Christi, Texas. The $1.6 billion plant remains in the early planning stages and would contain two steel arc furnaces. Construction on the plant could begin in the first half of 2018.

Nucor is planning a cold rolling mill complex addition at its existing sheet rolling mill in Blytheville, Arkansas. The complex will have a production capacity of 500,000 tons per year. Construction is set to begin during the third quarter of this year, taking about a year to complete. The project has an estimated total investment value of $230 million. For more information, see Industrial Info's project report.

New tariffs on rebar will be good for Sherman International Incorporated (Pittsburgh), which is constructing a 300,000-ton-per-year rebar mill in Campbell, Ohio. The facility is being built at a former pipe plant. The $325 million project kicked off in the fourth quarter of last year and is expected to be completed by the end of this year. For more information, see Industrial Info's project report.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.