How U.S. Steel Could Be Impacted By The Potential Imposition Of Anti-dumping Duties On Steel Imports

How U.S. Steel Could Be Impacted By The Potential Imposition Of Anti-dumping Duties On Steel Imports

A sharp increase in steel imports into the U.S. has negatively impacted the prospects of domestic steelmakers such as U.S. Steel. The company’s results suffered from an increase in steel imports and subdued demand conditions, which negatively impacted realized prices and shipments of the company’s Flat-rolled steel division, which accounts for around 60% of the company’s revenues. This was reflected in the company’s Q1 results, in which shipments for the Flat-rolled Steel segment stood at 2.62 million tons, as compared to 3.12 million tons (excluding shipments from U.S. Steel Canada, the results of which were deconsolidated from the company’s financial results in Q3 2014) in the corresponding period of 2014. In addition, competition from cheap imports drove down average realized prices for the division in Q1, which fell 1% year-over-year to $768 per ton (excluding the results of U.S. Steel Canada).

As per the domestic steel industry, a significant proportion of these imports are priced unfairly low. In response to the sharp rise in steel imports, domestic steelmakers have petitioned the U.S. International Trade Commission seeking the imposition of anti-dumping duties on imported steel from China, India, Italy, South Korea, and Taiwan for alleged unfair pricing of these imports. If anti-dumping duties are levied upon these steel imports, it would make imported steels less competitive and boost the prospects of domestic steelmakers such as U.S. Steel. In this article, we will explore the impact of this scenario on U.S. Steel’s stock price.

Impact of Imposition of Anti-dumping Duties on Steel Imports on U.S. Steel

Steel sheet imports to the U.S. accounted for 22% of the domestic market in 2014, up sharply from 15% of the domestic market in 2013. Two important reasons for the increase in steel sheet imports are the strengthening of the U.S. Dollar and the sharp increase in Chinese steel exports. Steel imports to the U.S. have been bolstered by the strengthening of the U.S. Dollar against global currencies, which has made these imports cheaper in Dollar terms.

The U.S. Dollar has strengthened considerably over the course of the last twelve months. The Dollar Index, which is a measure of the strength of the Dollar against a basket of other currencies, currently stands at 95, as compared to 80 twelve months ago. A higher value of the Dollar Index implies a stronger U.S. Dollar.

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