A Tough Year For Steel Stocks: Will 2020 Bring Good Tidings?
Zacks Investment Research | Dec 16, 2019 08:42PM ET
With 2019 nearing its end, it has been an underwhelming year for stocks in the steel space. In particular, U.S. steel stocks had been out of favor for most of this year. The American steel industry reeled under the effects of weaker steel prices, demand slowdown across major markets and damaging impacts of trade war.
The Trump administration’s imposition of 25% steel tariffs provided a shot in the arm to American steel makers last year and drove their earnings. However, after an initial tariff-induced rally, U.S. steel prices had been on a downswing and were down for much of this year. Lower prices have hurt the bottom lines of domestic steel companies through the first three quarters of 2019.
Shares of U.S. steel companies gained some ground recently on some recovery in steel prices, optimism surrounding the U.S.-China trade deal and the news of revival of tariffs on steel imports from Brazil and Argentina. The Trump administration had earlier exempted these two countries from the tariffs last year. The revival of tariffs is a positive development as Brazil is a major exporter of steel to the United States.
However, shares of major American steel makers such as United States Steel Corp. (NYSE:X) , Nucor Corporation (NYSE:NUE) and Steel Dynamics, Inc. (NASDAQ:STLD) have underperformed the broader market thus far in 2019. Notably, U.S. Steel’s shares have cratered roughly 28% year to date.
While shares of Nucor, the biggest U.S. steel maker, are in the positive territory this year, its stock performance is nothing worth writing home about. The company’s shares took a beating last week after it issued downbeat earnings view for the fourth quarter. Steel Dynamics’ stock performance has also been less than impressive.
However, AK Steel Holding Corp. (NYSE:AKS) has bucked the trend and outperformed the S&P 500 so far this year. AK Steel’s shares surged earlier this month after leading iron ore miner Cleveland-Cliffs Inc. (NYSE:CLF) announced the acquisition of the former in an all-stock deal worth $1.1 billion.
Nucor currently carries a Zacks Rank #2 (Buy), while U.S. Steel, Steel Dynamics and AK Steel currently have a Zacks Rank #3 (Hold). You can see Zacks Investment Research
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