Steel imports from Europe
In the previous part, we saw how Europe has overtaken North America as the largest steel exporter to the United States. Let’s now analyze why US steel imports from Europe are increasing at such a fast pace. Be aware that U.S. Steel Corporation (X) and ArcelorMittal (MT) also have a presence in European markets.
Slowdown in Europe
The European economy is still reeling under the impact of sovereign debt crisis. The European Union has been growing at a sluggish pace, which has reduced the steel demand in Europe.
To find out more, you can read Does the slowdown in Europe impact your investments?
Due to the slowdown in the demand for steel, steel prices in Europe have come down. Steel demands in countries such as Russia and Turkey have also been quite low. The above chart shows the price of hot-rolled (or HR) coil in the European market. The difference between US and European steel markets has widened over the past several quarters. Higher steel prices make the United States an attractive export destination. Although steel prices in the United States have come down in the past few weeks, they’re still high enough to encourage imports.
The strengthening dollar
The US dollar has strengthened against all major currencies. The dollar index is currently trading at elevated levels. A stronger currency makes imports cheaper for US customers. This further decreases the real landing cost of imported steel products.
Interestingly, while European steel exports have increased, European steel companies are also crying foul over imports from China. We’ll discuss this in our next part.