For Steel, There's An Inevitable Variance Between Demand And Reality

United States Steel Corporation (NYSE: X) has been rattled by reports of a potential delay in President Donald Trump’s infrastructure plan, and Axiom analyst Gordon Johnson said the series of events sounds about right.

Contractors had previously expanded their inventories in hopes of inking a federal deal, but now, as the expected demand has yet to manifest, anxiety is prompting some to sell off stock and recover expenses.

“Given how long it takes infrastructure packages to actually show up in real demand, exacerbated by how aggressive the U.S. steel mills have been on pumping prices higher (using Trump’s rhetoric as an impetus), we think there is an inevitable collision course coming between expectations on Trump-influenced steel demand and reality (i.e., demand that will, in our view, no doubt disappoint),” Johnson told Benzinga.

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He said the actual impact of Trump’s program could take time to materialize and cited the $4 billion reconstruction of New York’s Tappan Zee bridge as an example. Fourteen (14) years passed between initial planning and actual building, and the project took an additional five years to complete.

At a rate around $36.29, U.S. Steel was down 2.7 percent in Friday's pre-market trading after closing Thursday 9.2 percent lower.

Taylor Cox contributed to this report.