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U.S. Raw Steel Output Edges Down, Utilization Slips

U.S. raw steel production for the week ending Oct 3 inched down 0.5% on a week-on-week basis despite a healthy gain in output from the nation's biggest steel-producing region - Great Lakes, according to the latest report from the American Iron and Steel Institute ("AISI").

The decline in output follows a 1.7% rise for the week ending Sep 26. Capacity utilization - a key metric in the steel industry - also fell modestly on a weekly comparison basis.

According to data released by AISI - an association of North American steel makers - domestic raw steel production was 1,727,000 net tons for the reported week with a capability utilization rate of 72.2%, marginally down from production of 1,735,000 net tons and capability utilization rate of 72.6% for the week ending Sep 26. The reported weekly production represents a 7.3% slump from the same period a year ago.

By districts, production from Great Lakes went up 5.4% on a weekly basis to 659,000 net tons in the reported week. However, output from the Southern district - the second-largest steel-producing region - slipped 6% to 563,000 net tons. Raw steel production from the North East region also fell 5.3% to 195,000 net tons. Output from the Midwest ticked up 1.4% to 221,000 net tons. The Western region also posted a gain of 2.3% to 89,000 net tons.

Overall year-to-date production still lags behind year-ago levels. Adjusted year-to-date production through Oct 3 was 67,819,000 net tons at a capability utilization rate of 72.5%, down 8% from 73,727,000 net tons recorded in the same period a year ago. Capability utilization rate for the period is also significantly down from 78% recorded last year.

Depressed capacity utilization continues to batter American steel mills. Raw steel capacity utilization remains stubbornly below 80% this year, thereby affecting profits of U.S. steel makers. There is a dire need to raise the capacity utilization rate from the current depressed levels.

In addition, the domestic steel industry remains beset by a torrent of low-cost imports from foreign producers (particularly from China and South Korea), hurting margins of 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 . A recovering economy coupled with a stronger dollar has made the U.S. a dumping ground for subsidized steel.

Imports of steel remain a pressing problem faced by the ailing U.S. steel industry. 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% clocked for full-year 2014.

While major American steel producers have taken a series of steps in the recent past to repel the tide of imports, the domestic industry remains under the threat of unfairly-traded, cheaper imports in the wake of a stronger greenback.

Crude steel production plummeted 9.7% year over year to 7 million tons in the U.S. in August, marking the seventh straight month of decline this year, according to a recent World Steel Association ("WSA") report. Steel market fundamentals are expected to remain challenging in the U.S. through the remainder of 2015.

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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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