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U.S. Raw Steel Output Nabs Weekly Gain as Utilization Rise

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U.S. raw steel production for the week ending Sep 26 nudged up 1.7% on a week-on-week basis as production advanced across the nation's two biggest steel-producing regions - Great Lakes and Southern, according to the latest report from the American Iron and Steel Institute ("AISI"). Capacity utilization - a key metric in the steel industry - also went up on a weekly comparison basis.

According to data released by AISI - an association of North American steel makers - domestic raw steel production was 1,735,000 net tons for the reported week with a capability utilization rate of 72.6%, up from production of 1,706,000 net tons and capability utilization rate of 71.4% for the week ending Sep 19. However, the reported weekly production represents a 7.6% fall from the same period a year ago.

By districts, production from Great Lakes notched up a 0.6% gain on a weekly basis to 625,000 net tons in the reported week. Output from the Southern district - the second-largest steel-producing region - moved up 2.2% to 599,000 net tons. Raw steel production from the North East region slipped 2.4% to 206,000 net tons. Output from the Midwest was flat at 218,000 net tons. The Western region raked in a healthy gain of 24.3% in production to 87,000 net tons.

Overall year-to-date production still trails that of a year ago. Adjusted year-to-date production through Sep 26 was 66,092,000 net tons at a capability utilization rate of 72.5%, down 8% from 71,865,000 net tons recorded in the same period a year ago. Capability utilization rate for the period is also considerably down from 78% recorded last year.

U.S. steel mills still remain hamstrung by depressed capacity utilization. Raw steel capacity utilization remained stubbornly below 80% in 2014 and has stayed there this year, thereby affecting profitability of steel makers. There is a dire need to raise the capacity utilization rate from the current depressed levels.

An influx of unfairly-traded, cheap imports from overseas producers (including China and South Korea) is also weighing heavily on domestic steel producers. The U.S. steel industry saw a year over year rise in finished steel imports for the first eight months of 2015, according to a recent report from the AISI.

Finished steel imports for the eight-month period climbed 7% year over year to roughly 22.91 million net tons. Year-to-date finished steel import market share has been estimated at 31%, still higher than 28% recorded for full-year 2014. On the other hand, U.S. steel shipments are down 9.9% year over year so far this year, based on the most recent AISI report.

These low-priced imports are hurting the margins of American steel players including Nucor NUE , U.S. Steel X , AK Steel AKS , Steel Dynamics STLD and ArcelorMittal USA - a part of ArcelorMittal MT .

According to the World Steel Association ("WSA") - the international trade body for the iron and steel industry - crude steel production tumbled 9.7% year over year to 7 million tons in the U.S. in August, marking the seventh straight month of decline this year. The WSA envisions steel demand to contract 0.4% in the U.S. in 2015, before rebounding to a 0.7% growth next year.

While steel market fundamentals are expected to remain challenging in the U.S. through this year, continued strength in the automotive market and a rebound in construction activity represent tailwinds for the domestic steel industry.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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