US Steel Companies Starting to Benefit from Better Steel Prices

1 February 2017

Steel prices improved dramatically in 2016, while American steel producers also received a major leg up from the government’s crackdown on cheap steel imports that were taking over market share at the expense of American steel companies.

These positive improvements are starting to become apparent in American steel companies’ results. In is earnings seasons, and, early Tuesday, American steel company Nucor reported fourth-quarter earnings which topped analysts’ expectations.

In the fourth-quarter, Nucor earned 50 cents per share, or 43 cents on an adjusted basis, topping analysts expectations of 34 cents. EPS declined from 59 cents year-over-year. Revenue increased by 14.5% year-over-year to $3.96 billion, above analysts target of $3.78 billion. The fourth-quarter results included an inventory related benefit of $77.6 million, while the year-earlier quarter included a $153 million impairment charge.

Nucor is optimistic about the steel sector, going forward. The company did not issue precise numbers, but in its earning said that it expects the trend of better steel prices and increased volumes experienced in the fourth quarter to continue. Wall Street analysts have estimated first-quarter earnings of 82 cents per share and revenue of $4.430 billion. The next American steel company to report is U.S. Steel. Their earnings are on tap for Wednesday.

There is optimism that US steel companies will continue to benefit from the anti-dumping duties applied in 2016. In addition, there is hope that domestic demand for steel will climb as Donald Trump orders the improvement and development of US infrastructure, using domestically produced steel. Last week, when Trump signed executive orders to fast track the construction of the Keystone and Dakota Access pipelines, he mandated the use of US steel. This supported his campaign promise to develop infrastructure. It was that campaign promise which accelerated steel companies’ stock performance at the end of 2016. While the year as a whole was positive for most of these companies after Trump won the election gains accelerated in what is being dubbed the “Trump rally”.

Of note, Nucor’s stock actually fell after the company released its fourth-quarter results. Shares closed down 3.3% on Tuesday.