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Key Indicators US Steel Investors Should Track in 3Q17

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Part 5
Key Indicators US Steel Investors Should Track in 3Q17 PART 5 OF 9

Has US Steel Demand Started to Moderate?

US steel demand

Among other factors, the demand supply dynamics for steel tend to impact steel prices (CLF). So investors in U.S Steel Corporation (X), AK Steel (AKS), and Nucor (NUE) should follow the underlying demand indicators closely. The construction and automotive sectors account for the lion’s share of the US steel demand. In this part of the series, we’ll look at some of the recent economic indicators to gauge the demand from these sectors.

Has US Steel Demand Started to Moderate?

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Construction sector

Building permits and housing starts act as leading indicators of residential construction activity. Housing starts fell 4.8% to a SAAR (seasonally adjusted annual rate) of 1.2 million units in July. Building permits also fell last month. The data were worse than expected.

The ABI (Architectural Billing Index) is a leading indicator of non-residential construction activity. The index stood at 51.9 in July compared to 54.2 in the previous month. Although the index was above 50, which shows an increase in billing, July’s ABI is lower than the average for the first half of 2017.

Auto sales

US car sales continued to fall in July. They were at 1.4 million vehicle units last month according to data compiled by Autodata. Car sales fell 7.0% year-over-year in July. Sales also fell on a month-over-month basis. Notably, we’ve started to see some signs of moderation in US steel demand. During its 2Q17 earnings call, ArcelorMittal (MT) cut its 2017 steel demand guidance for the United States and raised China’s demand growth forecast by 200 basis points.

After a strong first half, China’s steel demand indicators have also been weak recently. We’ll look at this more in the next part of this series.

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