US steel sector could be further rocked by GM strike

Automaker accounts for 5 percent of U.S. steel demand.

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October 9, 2019

Nearly 50,000 General Motors employees who are part of the United Auto Workers (UAW) union entered their fourth week of striking as of Oct. 7. Chief among the workers’ concerns are wages, retirement benefits and the future of GM’s automotive factory in Lordstown, Ohio, which was idled in early March. The longer the strike, the more harm it threatens to do to U.S. steelmakers, according to a report from UBS Group AG, Zurich.

The report from analysts Cleve Rueckert and Andreas Bokkenheuser at UBS Group says the market likely has weakened since steel producers provided worse-than-expected financial guidance in September, according to an article by Bloomberg. The report says the GM strike creates more concern for the industry because the automaker represents roughly 5 percent of annual steel demand in the U.S.

Despite the Trump administration’s introduction of tariffs meant to help strengthen the U.S. steel sector, optimism in the steel sector has been fading, the article states, as continuing trade tensions between the U.S. and China, slower economic growth and fears of oversupply prompted by announced capacity expansions in the U.S. tug at the sector.

Bloomberg notes that an S&P gauge of steelmakers has declined 8.6 percent since the strike began Sept. 16.

“Domestic hot-rolled coil, the benchmark steel price, is down about 39 percent in the past 12 months, and is near the lowest price since 2016,” the Bloomberg article notes. “Meanwhile, U.S. Steel has fallen 63 percent in the past year, AK Steel Holding Corp. has dropped 53 percent, Steel Dynamics Inc. has lost 38 percent, while U.S. industry leader Nucor Corp. is down 23 percent.”