The battle for US Steel heats up as a second company launches a bid

<p>I've had a low-level <a href="https://www.forexlive.com/news/what-does-steel-say-about-the-state-of-the-us-economy-20230616/" target="_blank" rel="follow">interest </a>in steel companies for the past few years, in part because of their sensitivity to the global economy. Also, in part because they reflected a powerful change the began under the Trump administration and has accelerated since: The reshoring and rebirth of US industry.</p><p>Heavy protectionism separated the North American steel market from Chinese dumping and US fiscal spending on infrastructure boosted demand.</p><p>Despite that, steel companies remained forgotten, even as they cranked out huge earnings and deleveraged. Today though, the 'old' economy and one of classic US industrial companies is in focus: US Steel.</p><p>On the weekend, rival Cleveland-Cliffs made a 50/50 cash-and-share hostile bid for US Steel ($X) at about $35 and the company responded that it was undertaking a strategic review. Just now a second company Esmark Inc, has announced a rival all-cash bid at $35.</p><p>That's led to a 40% jump in the share price today but even at $35, the company is only valued at $7.8 billion compared to around $10 billion in EBITDA in the past three years (including estimates for 2023) along with $4 billion in free cash flow.</p><p>I think one of the reason that stock markets can stay strong is that many parts of it remain cheap, particularly industrials. A bidding war for US Steel might wake people up to the value in that market of the market and ongoing reshoring theme along with the massive investments that will need to be made in things like steel and mining during the green transition.</p><p>All that should continue to underpin the Mexican peso, which is the odds-on bet to be the forex trade of the decade.</p>

This article was written by Adam Button at www.forexlive.com.