• US steel stocks rose this week on several factors. Firstly, people think that the US and China are going to stop fighting and hug it out. Second, Chinese steel exports plummeted 40% in August.
  • US steel industry knows that China’s “subsidized” steel exports distort US and international markets.

US steel stocks

US steel stocks are rising today. As of 10:45 AM ET, U.S. Steel Corporation (X), AK Steel (AKS), and Nucor (NUE) are up 0.5%, 5.9%, and 1.15%, respectively. So what’s with the increase?

  • There’s renewed optimism over China and the USA making up and being friends again. Metals and mining stocks have been hit especially hard amid trade uncertainty. Stock prices tend to rise on any positive statement related to China trade talks but it’s not always a guaranteed and if the talks don’t end well, the prices fall to pre gain levels. Time to call in Dr. Phil.

Chinese steel exports crashed

2. Chinese steel exports fell hard last month & the markets reveal that lower Chinese steel exports are positive for global steel prices. China exported 5.01 million metric tons of steel last month—a year-over-year fall of 14.8%. Furthermore, in absolute terms, China’s August steel exports were at their lowest level since February. In February, China’s overall economic activity was lower due to the Lunar New Year. If we set aside February, China’s August steel exports were at their lowest level since January 2018.

3. All of China’s exports were weak in August. While that doesn’t bode well for metals, markets are anticipating further stimulus from China. On September 6, China lowered the reserve ratio for banks in a bid to support its economy – sound familiar? Recession fears have also abated, and Treasury yields have risen. The sharp bounce back for US steel stocks is also kind of a false positive bearing in mind the significant drops in 2018.

Is everything Okay?

The truth? No. Domestic end user demand has been tepid, and US steel’s upward momentum has stalled. The real estate-led boom in China lifted this year’s steel demand. However, China’s steel demand growth rates will taper down next year. For now, though, trade war optimism and stimulus hopes are lifting steel stocks. As for a US-China trade deal, don’t hold your breath.

US News has some great insight here

Check out our other news and blog posts here