Why Did US Steel’s Stock Price Decline By 50% In 2018

United States Steel Corporation (NYSE: X), an integrated steel producer with major production operations in the US and Central Europe, saw a significant decline in its stock price in 2018. Ever since the tariffs on steel imports were officially implemented on June 1, 2018, the company’s stock has fallen from about $37 to $18 at the end of December 2018. If we look at the full year’s picture, US Steel has shed more than 50% of its share value, from $39.40 in Jan 2018 to $18.24 on Dec 31, 2018.

Though the tariffs were supposed to help the domestic steel companies, history has shown that tariffs are only a short term fix. Though the domestic mills are operating at over 80% of their capacity, which is an impressive rise over a year ago, steel still remains a global commodity with a global market. Even with the current level of capacity utilization, the US still needs to import about 30 million tons of steel. Imposition of tariffs moves the demand towards domestic steel companies, but it does not help in addressing the supply situation, which still remains low domestically.

American steel consuming industries have to now pay higher taxes to the federal government for these imports. We had seen a similar decline in US Steel’s stock price when tariffs were imposed by the Bush administration in 2002. Last year, along with US Steel, many of its competitors, like Nucor and Steel Dynamics, saw a decline in stock price, albeit not as significant. However, tariffs are just one part of the story. Following are the two main reasons for a sharp decline in US Steel compared to its peers.

Source: www.forbes.com

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