United States Steel stock has dropped almost 25% in the last one year, compared to the S&P500 index which has gained 24% during the same time. U.S. Steel’s stock price movement is aligned to that of its peers, including Cleveland Cliffs (NYSE: CLF), which is down 43%, Rio Tinto (NYSE: RIO) which is down 10%, and VALE (NYSE: VALE) which is down 34% during the same period.
The drop in U.S. Steel’s stock price can be attributed to the global steel industry facing demand challenges, partly due to slowing economic growth in key markets like China and Europe. Additionally, despite strong revenues, U.S. Steel has struggled with tight operating margins and high input costs. Its operating and profit margins remain below those of many competitors, which dampens its attractiveness to investors. Separately, if you want upside with a smoother ride than an individual stock, consider the High Quality portfolio, which has outperformed the S&P, and clocked >91% returns since inception.
What is the U.S. Steel and Nippon saga?
Japan’s Nippon Steel’s attempt to acquire U.S. Steel was blocked by President Biden in late 2024 due to national security concerns. This $15 billion deal faced opposition from the Committee on Foreign Investment in the United States, union groups, and political leaders. The concerns centered on the potential loss of domestic steel production capacity, especially given U.S. Steel’s critical role in national security and supply chains. People also feared Nippon might prioritize imports over local production, risking American jobs and facilities.
Nippon Steel had proposed several concessions to address these concerns, including guarantees on production levels and oversight measures, but these were deemed insufficient. President Biden’s decision aligned with his administration’s broader focus on industrial policy and safeguarding domestic manufacturing. Both companies have since filed lawsuits challenging the decision, alleging political interference and failure to conduct a proper review process. The outcome of these challenges remains uncertain.
The increase in X stock over the last 4-year period has been far from consistent, with annual returns being considerably more volatile than the S&P 500. Returns for the stock were 42% in 2021, 6% in 2022, 96% in 2023, and -30% in 2024. The Trefis High Quality Portfolio, with a collection of 30 stocks, is considerably less volatile. And it has comfortably outperformed the S&P 500 over the last 4-year period.
Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment around rate cuts and multiple wars, could X face a similar situation as it did in 2024 and underperform the S&P over the next 12 months – or will it see a strong jump?
So What does the Trump Presidency mean for U.S. Steel?
President Donald Trump has expressed strong opposition to Nippon Steel’s proposed acquisition of U.S. Steel. His position aligns with his “America First” philosophy, which prioritizes keeping strategic American industries under domestic control to protect jobs, manufacturing capabilities, and national security. His administration has historically supported domestic steelmakers through measures like the Section 232 tariffs, which imposed a 25% levy on most imported steel to protect national security. These policies led to higher domestic steel prices and improved profit margins for U.S. producers, although they also faced criticism for increasing costs for manufacturers reliant on steel imports. For his second term, Trump has proposed further trade protectionism, such as new tariffs on steel imports and potentially on manufactured goods that contain steel, such as vehicles and appliances.
The future for United States Steel stock remains uncertain, influenced by a mix of operational challenges, market dynamics, and external political factors. For now, Trefis’ United States Steel valuation is around $40 per share, implying about 11% gains.
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