Steel Gains as Cold-Rolled Trade Case Filed; Hot-Rolled, Stainless Steel Cases Seen as Likely, Says Analyst (AKS) (X) (NUE) (MT) (STLD)

This morning AK Steel (NYSE: AKS) announced that it has joined other major domestic steel producers in filing antidumping and counter-vailing duty petitions against eight countries related to cold-rolled steel. The joint petition was filed by Nucor (NYSE: NUE), Steel Dynamics (NASDAQ: STLD), ArcelorMittal (NYSE: MT), U.S. Steel (NYSE: X), and SSAB Americas.

The antidumping petitions charge that unfairly traded imports of cold-rolled steel from Brazil, China, India, Japan, South Korea, Netherlands, Russia, and the United Kingdom are causing material injury to AK Steel and the domestic steel industry. The counter-vailing duty petitions charge that significant subsidies have been provided to the foreign producers by the governments of Brazil, China, India, South Korea, and Russia.

Commenting on the news, KeyBanc analyst Philip Gibbs noted that based on comments on AK Steel's conference call, hot-rolled and stainless steel trade cases look likely.

Gibbs explained, "We believe the release was timed in line with earnings results from AKS (released before market open) and U.S. Steel (releasing results post-close) and is providing support for the steel equities this morning following the sizeable pullback in recent weeks. AK Steel, on this morning's earnings call, also mentioned the potential for hot-rolled and stainless steel trade cases looks likely, saying 'Stay tuned.' This appears consistent with recent market rhetoric/expectations."

"The petitions were filed concurrently with the U.S. DOC and U.S. ITC in response to large and increasing volumes of low-priced imports of cold-rolled steel from the subject countries that the petitioners believe are injuring U.S. producers. AKS, in particular, noted on its call this morning 'free trade must be fair trade,'" continued the analyst.

Gibbs added, "Alleged anti-dumping duties range from 42-266%; while petitioners believe foreign producers in Brazil, China, India, South Korea, and Russia are benefiting from numerous countervailing subsidies provided by their governments. Year-to-date cold-rolled volumes through May from alleged countries (793,360 tons) - up 44% YTD YOY - accounting for roughly 63% of total cold-rolled imports, 17% of total sheet imports, and 5% of total finished steel imports. Of total cold rolled sheet imports (subject and non subject) subject material from Brazil accounted for 9%, China 25%, India 4%, Japan 6%, Korea 10%, Netherlands 2%, Russia 3%, and the U.K. 4%."

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