Trump's Tariff Beneficiaries Still Have a Problem: Fundamentals
(Bloomberg) -- No matter how many barriers Donald Trump erects to protect the U.S. steel and aluminum industries, there’s one thing the president won’t quickly change: global market fundamentals.
Century Aluminum Co. headed for the biggest drop in seven months and AK Steel Holding Corp. fell to the lowest since May 2016 after each of the U.S.-based companies reported less-than-stellar earnings -- despite being direct beneficiaries of Trump’s steel and aluminum tariffs. The companies have also been among the most vocal supporters of the measures.
Tariffs have helped on sales. Chicago-based Century said in its earnings report on Thursday that U.S. deliveries remain firm, supported by the administration’s trade policies. AK Steel said its third-quarter sales increased 16 percent because of higher selling prices and shipments. But tariffs aren’t permanent, analysts say, and they certainly can’t address issues of global overcapacity and U.S. power prices.
“The problem I think you have on the producer side in the U.S. is that the industry is still as inefficient as it has been,” Michael Widmer, the head of metal markets research at Bank of America Merrill Lynch, said in an interview in London. U.S. companies also have a relative disadvantage in terms of power prices, he said.
Century plunged 14.9 percent to $8.065 at 2:47 p.m. in New York, while AK Steel dropped 10 percent to $3.80.
©2018 Bloomberg L.P.