NEW YORK — The U.S. steel industry may see a banner second half if trade cases are filed and certain legislation is approved, according to Credit Suisse Group AG.
"We believe the second half is increasingly looking like a win-win scenario for U.S. steel equities,” Nathan Littlewood, an analyst at the Zurich-based investment bank, said in a May 29 research note.
Littlewood said that if the alternative scenario—continued import pressure and low steel prices—plays out, it would help companies filing a trade case, which “doesn’t seem like an entirely negative outcome for the equities either.”
Among legislation that could be good for the steel industry are the Trade Promotion Authority (TPA) bill and the Customs bill, Littlewood said.
The TPA was approved by the Senate on May 22 without currency manipulation protection sought by the steel industry (amm.com, May 26), but the Customs bill, approved a week earlier, includes currency provisions as well as sections strengthening anti-dumping and countervailing laws. Both bills are now awaiting House action.
Groups such as the Metals Service Center Institute and the American Iron and Steel Institute, which expressed disappointment that currency provisions were left out of the TPA legislation, are now trying to push lawmakers to vote for the whole Customs bill.
“If (the Customs bill is) passed, it would be a critical win for the domestic steel industry,” Littlewood said.
“A timing overlap between the bill and quarter-end introduces timing uncertainty that a trade case filing may get pushed to the third quarter,” he said, although the investment bank believes trade cases should not hinge on the passage of either the TPA or the Customs bill.
While the entire sector is expected to be buoyed by a favorable environment, Littlewood said service centers—such as Reliance Steel & Aluminum Co., Los Angeles; Worthington Industries Inc., Columbus, Ohio; and Olympic Steel Inc., Bedford Heights, Ohio—will benefit from a drop in import volumes and a gain in market share.
“We continue to like U.S. Steel (Corp.) for both its long-term self-help story as well as shorter-term leverage to the trade case story,” Littlewood said of domestic steelmakers.
Raw material suppliers also would benefit from fewer imports since domestic blast furnaces might increase production, he said.