Date: July 8, 2019
The Trump Tariff Twist That’s Cost U.S. Steel $5.5 Billion
“President Donald Trump’s tariffs on foreign steel have sped the decline of some of the U.S. mills he vowed to help. Exuberance over the levies dramatically boosted U.S. output just as the global economy was cooling, undercutting demand. That dropped prices, creating a stark divide between companies like Nucor Corp., that use cheaper-to-run electric-arc furnaces to recycle scrap into steel products, and those including U.S. Steel Corp., with more costly legacy blast furnaces. Since Trump announced the tariffs 16 months ago, U.S. Steel has lost almost 70% of its market value, or $5.5 billion, and idled two American furnaces in mid-June that couldn’t be run profitably at the lowest prices since 2016. Meanwhile, Nucor, down around 20%, has touted $2.5 billion in expansion projects. The president’s actions likely “sped up” up an unavoidable “evolution,” said Nucor Chief Executive Officer John Ferriola in an interview last month. “Are some companies are going to suffer? Absolutely. We’ll we see some capacity go away, I’m sure of it.” Last July, Trump stood on a makeshift stage at a U.S. Steel mill in Granite City, Illinois, and beamed as workers cheered the tariffs. At that point, the company had already restarted one of two blast furnaces at Granite City, and vowed the second would soon be brought online. “Workers are back on the job, and we’re once again pouring new American steel into the spine of our country,” Trump said during the hour-long program. “U.S. Steel is back.” ”
ECB Officials Ready to Add Stimulus But Won’t Say When or How
“European Central Bank policy makers reiterated their readiness to add monetary stimulus for the euro zone, but signaled they’re not yet united on when or how to act. Executive Board member Benoit Coeure said in remarks broadcast Monday that loose policy is needed now “more than ever” and interest-rate cuts and quantitative easing are both on the table. Bank of France Governor Francois Villeroy de Galhau said the ECB has the “determination” to act but noted mixed readings on the economy and suggested there’s no need to rush into a decision this month. “We have several Governing Councils to come in the next months,” Villeroy said in a CNBC interview. “If and when needed, there must be no doubt about our determination to act and our capacity to act. I repeat, if and when needed.” Economic reports on Monday showed how there are silver linings amid the euro zone’s slowdown, as German industrial production saw a slight pick-up in May. At the same time, the Bank of France cut its growth estimate for the second quarter and said confidence among manufacturing executives has dropped to its lowest level in six years. The euro area has been cooling for more than a year, driven by global trade tensions and political uncertainties that have especially weighed on manufacturers. Another Governing Council member, Bank of Finland Governor Olli Rehn, said last week that the slump should no longer be considered a “temporary dip” and that ECB has a number of instruments available for support. Coeure, who is in charge of market operations and was a driving force behind QE, shared that view in his comments in an interview this weekend in Aix-en-Provence, France. “We have piloting expectations for monetary policy — forward guidance; we have rates which are very low and we said we are ready to cut them even more if necessary — I always add if necessary; and we have a presence on financial markets with reinvestment of our portfolio of assets,” he said on BFM Business Radio. “We could hypothetically restart net asset purchases again if circumstances make it necessary.’’ ”
China’s Venture Capital Boom Shows Signs of Turning Into a Bust
“China went through a five-year surge in venture capital investment that fostered a new generation of startups from ride-hailing giant Didi Chuxing to TikTok-parent Bytedance Ltd. Now the boom may be over. Venture deals in China plummeted in the second quarter as investors pulled back amid unpredictable trade talks and growing concerns about startup valuations. The value of investments in the country tumbled 77% to $9.4 billion in the second quarter from a year earlier, while the number of deals roughly halved to 692, according to the market research firm Preqin. The second quarter of 2018 marked the peak for China venture deals with a total of $41.3 billion invested. That included a $14 billion round for digital payments giant Ant Financial, $3 billion for e-commerce upstart Pinduoduo Inc. and $1.9 billion for truck-sharing service Manbang Group (known also as Full Truck Alliance Group). By comparison, the largest venture deal in the second quarter of 2019 was a $1 billion investment in JD Health, the health care affiliate of e-commerce provider JD.com Inc. China has never been through a widespread bust like the U.S. did after the dotcom boom, in part because the country’s venture market is so new. Years of steady growth in tech investments resulted in predictable — and enormous — profits. Whether the current downturn becomes a painful crash depends in large part on how VCs, entrepreneurs and regulators navigate terrain they’ve never seen before. “We’re seeing real stress in the system for the first time,” said Gary Rieschel, a founding partner at Qiming Venture Partners who has worked in China and the U.S. “We have never seen a downturn in the China market. For 20 years, it’s been pretty much up and to the right.” ”
Analyst Certification -The views expressed in this research report accurately reflect the personal views of Mayberry Investments Limited Research Department about those issuer (s) or securities as at the date of this report. Each research analyst (s) also certify that no part of their compensation was, is, or will be, directly or indirectly, related to the specific recommendation (s) or view (s) expressed by that research analyst in this research report.
Company Disclosure -The information contained herein has been obtained from sources believed to be reliable, however its accuracy and completeness cannot be guaranteed. You are hereby notified that any disclosure, copying, distribution or taking any action in reliance on the contents of this information is strictly prohibited and may be unlawful. Mayberry may effect transactions or have positions in securities mentioned herein. In addition, employees of Mayberry may have positions and effect transactions in the securities mentioned herein.