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Even though it seemed as if the North American steel market had recently peaked, all indications now suggest that 2017 will be another growth year.
Even though it seemed as if the North American steel market had recently peaked, all indications now suggest that 2017 will be another growth year.
“While last year was very volatile, it was definitely better than 2015, which was a dreadful year,” Amy Bennett, principal consultant for Metal Bulletin Research, said.
This turnaround was made possible by a number of production cutbacks at several integrated producers in the USA.
Not only did US Steel (which has fallen one place to No24 in Metal Bulletin’s global top steelmaker rankings this year) permanently close its blast furnace at its works in Fairfield, Alabama late in 2015, it also idled its mill in Granite City, Illinois.
While it restarted the finishing end at Granite City early in 2017, the hot end of that mill remains closed and US Steel’s plans to add an electric arc furnace at Fairfield remain indefinitely on hold.
Also, late in 2015, AK Steel (which has fallen to No64 from No62) idled its mill in Ashland, Kentucky, and has no immediate plans to restart it.
ArcelorMittal (which remains No1) had idled one of its two blast furnaces at its Indiana Harbor West works, but brought it back online earlier this year.
According to the American Iron & Steel Institute (AISI), following a 0.5% decline in 2016, US crude steel production had increased by 34% year-on-year towards the end of March, allowing domestic mill capacity utilisation to inch up from the low-70% level to 74.1% in mid-May.
The latest AISI data shows that adjusted year-to-date production on May 20, 2017 was 34,665,000 net tons, at a capacity utilisation rate of 74.3%. This is up 3.0% from the 33,644,000 net tons produced during the same period of last year, when the capacity utilisation rate was 72.1%.
Steel operating rates are expected to remain fairly steady this year despite the ramping up of Big River Steel, which began production in December, and Commercial Metals Corp’s second rebar mini-mill later this year in Durant, Oklahoma.
Acero Junction – the former Wheeling-Pittsburgh Steel Corp in Mingo Junction, Ohio – was reopened this year, but its hot end remains closed, at least for the time being, according to Christopher Plummer, md of Metal Strategies.
While there were also a number of trade cases filed in 2015 and 2016 – and even a few in 2017 – Bennett says it was largely because of these production cutbacks, as opposed to the trade cases, that steel prices started to recover in the first quarter of 2016 and really began to pick up steam in the second quarter, before backing off slightly later in the year but never getting back down to 2015 levels.
After a short pause, they began to move up again, starting in late-2016 and continuing to climb until they peaked this April. Although they could continue to ease downward through the second half of the year, John Anton, director of steel analytics for the pricing and purchasing service of IHS Markit, does not believe that they will crash.
In fact, they could find some upward support by a combination of conventional anti-dumping trade cases, the possibility of Section 232 tariffs and the Trump administration’s “Buy American” push for both the energy and manufacturing sectors.
While Anton does not believe it is likely, he says that should the Section 232 and the Buy American order – both of which are at the discretion of US president Donald Trump – go through in their strongest form, they would result in a tightening of the US steel market and possibly as much as a 20-30% rise in product prices.
Recently, despite the numerous trade cases, US steel imports have been rising and, especially given the strong US dollar and the fact that steel prices in the country are generally higher than those elsewhere in the world, they could continue to do so.
US steel imports reached a two-year high in April. AISI points out that US steel imports were up 23.5% year-on-year towards the end of April, following a 14.9% decline for the full year in 2016.
Volatile steel raw material prices have been, and continue to be, a big factor in the US steel market. Plummer points out that – after they more than doubled last year – there has recently been a sharp reversal.
Underlying steel demand has been fairly steady. MBR’s Bennett notes that while automotive demand is easing somewhat, energy and construction demand – although not booming – is picking up.
“On the whole we are optimistic about 2017,” she says.