NEW YORK (TheStreet) -- United States Steel (X) was falling 5.76% to $25.20 on Wednesday morning after the U.S. Department of Commerce announced it would not impose tariffs on South Korea's steel pipes used in the oil and natural gas industries.
U.S. Steel and other American steel companies would have benefited from such a tariff, but South Korea, the largest steel exporter among nine nations named in a trade case filed by U.S. Steel Corp. and other producers, avoided it. U.S. Steel and its associates alleged that South Korea had been selling steel pipes at unfairly low prices, but the Department of Commerce stated it found no evidence of such action.
"In our opinion, this outcome is a material negative surprise to Street expectations," JP Morgan wrote in a research note on Wednesday morning. "Specifically, the DOC found no OCTG [oil country tubular goods] dumping by Korea, the largest exporter to the U.S. by far at 17% of 2013 consumption. In our view, this finding alone is sufficient to pressure U.S. Steel's tubular margins given Korea's 2014 OCTG exports will likely continue trending above the 2013 average. In addition, other preliminary dumping margins were well below what we view as the only benchmark available, initial alleged margins disclosed in the trade case."
TheStreet Ratings team rates UNITED STATES STEEL CORP as a "hold" with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:
"We rate UNITED STATES STEEL CORP (X) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. Among the primary strengths of the company is its solid stock performance, considering both the consistency and magnitude of the price movement over time. At the same time, however, we also find weaknesses including deteriorating net income, generally higher debt management risk and disappointing return on equity."