Dividends and US Steel in deep slump despite Trump’s claim of revival

When the President speaks he sounds optimistic and whatever event he has worked on to make a change. Then the lights go down and reality or fact check comes out. The President often talks about how the steel industry is coming back and more people are employed. Alan Rappeport of the New York Times News Services recently examined the steel industry, in light of the tariffs imposed and the President’s claim the industry is vibrant.

Hiring in the steel sector remains stagnant in part every new mill is increasing automated. Overall the numbers was 146,300 in November which is 4% lower than it was 4 years ago. Perhaps when a company makes an announcement the President thinks it is operational the next day, the reality is of the 50 announcements made, 35 were built or restarted.

The President imposed steel tariffs which pushed up prices 50%, the problem was the users of steel struggled to absorb the cost of steel and increase prices in their supply chain. Caterpillar said it would face $200 million in addition costs’ GM slashed its profit forecasts: and many companies tried to find alternative materials or delayed which has caused steel prices to fall. In the steel world, prices for US made hot-rolled coil steel went up 41%, then has fallen 21% this year.

If you bought steel companies because the President thought the industry was vibrant, you would have lost money – AK Steel Holdings are down 56%, US Steel is down 46%, Steel Dynamics is down 29% and Nucor is down 18%.

It should be noted John Ferriola of Nucor says he had the best year ever and many of his customers had record years.  Nucor is considering building a new $1.35 billion plant in the Midwest although analysts believe unless something changes it would only add production forcing prices to go down.

From the government the steel mills are looking for the President to pass infrastructure funding to fix America.

Linking to dividend paying stocks, when we look and listen to our leaders we want to believe them. They should be saying the right things and for some it is music to their ears; on the stock market there is a great deal more skepticism – shows us the results. How did you do? What is the Cash Flow? the Growth? the Risks?. Listen to the President but do not necessarily follow his advice for the most important lesson in investing is try not to lose money.

There are more questions than answers, till the next time – to raising questions.

 

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