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U.S. Raw Steel Production Slips on Lower Utilization

U.S. raw steel production for the week ending Oct 10 shrank 1.3% on a week-on-week basis on reduced capacity utilization, according to the latest report from the American Iron and Steel Institute ("AISI"). The week saw a sharp decline in output from the Midwest region.

The decline in production follows a modest 0.5% fall for the week ending Oct 3. Capacity utilization - a key metric in the steel industry - also dropped on a weekly comparison basis.

According to data released by AISI - an association of North American steel makers - domestic raw steel production was 1,705,000 net tons for the reported week with a capability utilization rate of 71.3%, down from production of 1,727,000 net tons and capability utilization rate of 72.2% for the week ending Oct 3. The reported weekly production also represents a 7.3% year over year slump.

By districts, production from Great Lakes edged down 0.8% on a weekly basis to 654,000 net tons in the reported week. However, output from the Southern district - the nation's second-largest steel-producing region - ticked up 0.9% to 568,000 net tons. Raw steel production from the North East region contracted 3% to 189,000 net tons. Output from the Midwest slid 8% to 203,000 net tons. Mills in the Western region produced 91,000 net tons of raw steel, up around 2% from a week ago.

Overall year-to-date raw steel production continues to lag behind year-ago levels. Adjusted year-to-date production through Oct 10 was 69,524,000 net tons at a capability utilization rate of 72.5%, down 8% from 75,566,000 net tons recorded in the same period a year ago. Capability utilization rate for the period is also significantly down from 77.8% recorded last year.

Domestic steel mills remain weighed down by depressed capacity utilization. Raw steel capacity utilization remains persistently below 80% this year, thereby affecting profits of American steel producers.

U.S. steel makers including Nucor NUE , U.S. Steel X , AK Steel AKS , Steel Dynamics STLD and ArcelorMittal USA - a part of ArcelorMittal MT - also remain plagued by an influx of cheaper imports from overseas producers including China. A recovering economy coupled with a stronger dollar has made the U.S. an attractive market for unfairly-traded, low-priced steel.

Per AISI, finished steel imports rose 3% year over year in the first nine months of 2015, based on the Commerce Department's most recent Steel Import Monitoring and Analysis ("SIMA") data. Estimated year-to-date market share of finished steel import is 30%, still higher than 28% recorded for full-year 2014. On the other hand, steel shipments are down 10.2% year over year in the U.S. so far this year, based on the most recent AISI data.

According to World Steel Association ("WSA"), 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. Demand environment for steel is expected to remain challenging in the U.S. through this year as a stronger greenback and a sluggish energy sector continue to weigh on the domestic steel industry. The WSA envisions steel usage to drop 3% in the U.S in 2015 (after a solid 11.8% rise in 2014), before springing back to a 1.3% gain next year.

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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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