AK Steel Holding Corp (NYSE:AKS) shares plummeted sharply last year; shares lost almost half of the value. Strong pricing pressure and the flow of imported steel has been impacting the company’s margins and earnings potential.
Steel industry stocks rallied sharply after Trump’s pro steel policies and the potential for higher tariffs from DoC. AKS steel stock price rose more than 13% in Monday trading to $6 a share. The stock has the 52-week trading range of $4.00 – $9.19.
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Donald Trump Plans to Discourage Steel Imports
Donald Trump’s extraordinary attention towards the revival of steel industry had supported the demand for domestic U.S. companies last year. He initially took several steps, including increasing infrastructure spending and discouraging the imported steel, to support the steel industry.
However, imported steel from China, Brazil, and other countries continues to impact the performance of domestic companies, including AK Steel.
Consequently, Trump recently decided to take stricter actions against imported steel and said: “the U.S. is being decimated by countries dumping their steel products.” He called for tariffs to fix the problem.
Following his comments, The Department of Commerce (DoC) suggested new tariffs on imported steel from certain countries; it recommends a tariff of 7.7% on all aluminum exports, 24% duties on all global steel imports, and tariff increase to 53% on steel imports from China, Brazil, Russia, India, and numerous other countries.
BofA Merrill Lynch Downgraded AK Steel
U.S. domestic steel companies have been struggling to compete with cheaper steel from India, Brazil, China and other countries.
Therefore, the intense pricing pressure led AKS steel to post losses in the final quarter of the last year. Also, the company highlighted lower than expected margins for the first quarter.
Considering the bleak prospects for the margin growth, BofA Merrill Lynch has downgrade AKS stock price to Underperform from Buy ratings. The firm has also declined the target price for AK Steel to $5.50 from an earlier target of $8.
“The company’s disappointing quarter and normalized earnings guidance are due to management’s commodity neutral approach,” BofA believes.
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