US Steel Imports Drop In 2018 As First Year Of Tariffs Nears

U.S. steel imports dropped roughly 12% in 2018 under the weight of broad-based tariffs which the Trump administration imposed on imported steel under Section 232 of the Trade Expansion Act of 1962 a year ago.

According to the latest report from the American Iron and Steel Institute (“AISI”) – an association of North American steel makers – total and finished domestic steel imports are down 11.5% and 13.1% year over year, respectively, in 2018 to roughly 33.73 million net tons and 25.69 million net tons, respectively. Per the AISI, these figures are based on final U.S. Census Bureau data. Finished steel import market share was 23% for the year. That is down from 27% clocked in 2017.

The biggest offshore suppliers for 2018 were South Korea with 2,764,000 net tons (down 26% year over year), Japan with 1,383,00 net tons (down 8%), Germany with 1,339,000 net tons (down 5%), Turkey with 1,153,000 net tons (down 47%) and Vietnam with 1,110,000 net tons (up 48%).

Tariffs Put U.S. Steel Mills Back in Business

President Donald Trump, on Mar 8, 2018, signed orders imposing steep tariffs on steel and aluminum imports, defying a wave of criticism and threats of counter-measures from major foreign trade partners. The tariffs, which came into effect on Mar 23, are approaching the end of their first year.

The tariffs are aimed at rescuing the domestic steel and aluminum industries which had long been reeling under the onslaught of cheap imports and has suffered significant reduction in production and employment. The tariffs also fulfilled one of President Trump’s key election promises of bringing down America's massive trade deficit. The tariffs are, in particular, are targeted at countries with which the United States has significant trade deficits.

The Trump administration, in May 2018, moved ahead with tariffs on steel and aluminium imports from Canada, Mexico and the European Union following the expiration of temporary exemptions on these major U.S. allies. With this, all tariffs on steel imports went into effect from Jun 1, 2018. This was a welcome move as Canada and Mexico are two major sources of steel imports to the United States, together representing roughly a quarter of U.S. steel imports.

The 25% tariffs on steel imports have provided a breather to American steel makers and have put the wind back into the sails of the long-struggling U.S. steel industry. The tariffs have boosted production capacity of U.S. steel producers amid lower imports. They have helped U.S. steel industry capacity break above the important 80% level – the minimum rate required for sustained profitability of the industry.

American steel mills are also benefiting from higher domestic steel prices as a result of the trade actions. Higher steel prices boosted profits of U.S. steel makers in 2018. Leading U.S. steel companies such as United States Steel Corp. (NYSE:X) , Nucor Corp. (NYSE:NUE) , Steel Dynamics, Inc. (NASDAQ:STLD) and AK Steel Holding Corp. (NYSE:AKS) gained from higher realized steel prices in the fourth quarter.

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While U.S. Steel has a Zacks Rank #5 (Strong Sell), Nucor, Steel Dynamics and AK Steel currently carry a Zacks Rank #3 (Hold). You can see Zacks Investment Research