What’s Driving the Recent Uptrend in US Steel Production?
US steel production
Previously in this series, we looked at US steel imports and analyzed some demand indicators. Along with demand, we also need to look at supply-side indicators to gauge the demand-supply balance. In this part, we’ll look at weekly US steel production data released by the AISI (American Iron and Steel Institute).
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According to AISI data, US steel production rose 6.5% YoY (year-over-year) in the week ended August 19, 2017. US steel production has risen 3.0% on a year-to-date basis. However, it’s worth noting that we’ve seen a rise in the growth rate over the last few weeks. US steel production fell on a yearly basis in June. Let’s see what the drivers of the recent uptrend could be.
As noted previously, steel imports fell slightly in July. As import penetration levels seem to have fallen, we’ve seen an increase in US steel production. There has also been a slight uptick in service center inventory, which is supporting US steel production (MT). Stable scrap prices could be another factor supporting US steel production. In the past, steel buyers have held back their purchases if they anticipated a fall in scrap prices since US steel prices generally follow scrap prices (NUE) (STLD).
Capacity utilization ratio
The US steel industry’s capacity utilization rate was 75.6% in the week ended August 19, 2017. The utilization rate in the corresponding period last year was 70.8%. Although the US steel industry’s capacity utilization use has picked up over the last month, it’s still not healthy. We should remember that the US steel industry’s (X) (AKS) capacity utilization ratio has been below 80.0% since November 2014.
In the next part, we’ll look at China’s July steel production.