Steel stocks should be boosted by Donald Trump's tariffs and infrastructure moves
By Larry Ramer
X’s forward P/E is around 9.1.
Source: Investor Place
http://investorplace.com/2017/05/3-stee ... Q0_Q9J96M8
X’s forward P/E is around 9.1.
China pledged early last year to cut 150 million tonnes of excess capacity by 2020. The move, along with rising steel trade barriers and an infrastructure spending splurge by Beijing, helped global steel prices surge 45 per cent since December 2015.
But Chinese steel prices have slipped in recent weeks on concerns about a slowdown in construction and infrastructure projects.
Output in China, which accounts for half of global steel production, rose 4.6 per cent in the first quarter to 201.1 million tonnes, after a 1.2 per cent increase to 808.4 million tonnes last year.
China, which holds nearly half the world’s 800 million tonnes of spare capacity, cut 65 million tonnes of capacity in 2016 and aims to cut another 50 million tonnes this year.
Iran and Russia, amongst others, have added new capacity beyond their domestic needs. “They’ll start to export much more, so for sure China’s cuts won’t be enough,”
OECD said global steel capacity rose 1.4 per cent in 2016 to 2.39 billion tonnes.
Iran has 19 projects planed between now and 2019 that will expand capacity by almost 24 million tonnes, adding to existing estimated capacity of 28 million tonnes now,
The U.S. needs steel, and it looks like more of it will come from U.S. steel companies.
One reason for the fruitless talks in Washington was that China refused to agree to US demands that it eliminate excess steel capacity, Reuters reported.
Steel is not a big item in the bilateral trade relationship, with annual turnover of US$520 billion,
China produces more than half the world’s steel, but 90 per cent of that output is for its own domestic use.
Chinese exports of steel products dropped 3.5 per cent in 2016 to 108 million tonnes, partly because of anti-dumping and countervailing investigations against Chinese steel products in importing countries.
The US imported 30.1 million tonnes of steel last year, but only 1.13 million tonnes, or 3.8 per cent, were actually from China.
In steel exports to the US, China fell behind Canada, South Korea and Turkey, according to the US Department of Commerce.
After more than a decade of steel-related trade disputes, steel shipments to the US accounted for just 1 per cent of China’s total steel exports last year.
Although China exported only 10 per cent of its steel output, even that limited volume is bigger than the combined steel production of the US and Britain.
Although China said it had shut down 65 million tonnes of capacity last year amid Beijing’s effort to curb pollution and reduce excess supply, its actual output of crude steel still climbed 1.2 per cent in 2016.
In the first half of this year, Chinese crude steel output rose 4.6 per cent from a year earlier to 420 million tonnes, according to China’s National Bureau of Statistics.
China’s first-half exports of steel products by volume fell 28 per cent from a year earlier to 41 million tonnes, China’s customs data showed.
So far this year, steel rebar futures have rallied on the Shanghai Futures Exchange — the September 2017 contract is up 40 percent to date, and is sitting today at around 4,131 yuan, according to Reuters data.
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