By Ben Fox Rubin
Shares of U.S. Steel Corp. (X) and AK Steel Holding Corp. (AKS)
dropped Wednesday after a federal trade investigation determined
that a major importer will avoid additional tariffs, a finding that
puts pressure on the domestic steelmakers.
The U.S. Department of Commerce on Tuesday disclosed preliminary
findings on its investigation into potential dumping of tubular
steel product imports from a handful of countries.
U.S. law protects domestic companies by imposing duties on
foreign companies' products that are found to be sold in the U.S.
at less than fair value. The antidumping duties are meant to level
the playing field and prevent market-distorting effects.
While several countries were found to be dumping imports,
Korea--by far, the largest importer of those steel products--was
found to not be dumping and currently doesn't face additional
duties.
The Commerce Department did find dumping issues with imports
from India, the Philippines, Saudi Arabia, Taiwan, Thailand,
Turkey, Ukraine and Vietnam, and companies from those countries now
face antidumping duties. Still, all those countries import much
less of the tubular steel than Korea.
The findings hit U.S. Steel particularly hard because it is the
largest North American tubular steel producer. AK Steel also
produces tubular steel.
J.P. Morgan analyst Michael F. Gambardella said in an analyst
note that the finding is "sufficient to pressure U.S. Steel's
tubular margins" because Korea's importing will likely continue to
increase this year. He added that other preliminary dumping duties
were "well below" his expectations.
U.S. Steel is already struggling with weak pricing and lower
shipments of its products, helping push the company's bottom-line
into the red for each quarter of 2013. U.S. Steel has pushed
forward a number of management changes in recent months, including
a shake-up last summer that brought in a new chief executive.
Shares of Luxembourg-based Tenaris S.A. (TS) also fell, as the
finding won't slow Korea, one of the steel pipe manufacturer's
major competitors, according to Sterne Agee.
The final Commerce Department determination is set for July 8,
and final injury determinations will be made in August, the
department said.
Write to Ben Fox Rubin at ben.rubin@wsj.com
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