US steel demand indicators
Most steel companies reported higher shipments in 2Q15. U.S. Steel (X) is an exception, as the company’s 2Q15 shipments fell due to weakness in energy markets. Strong steel demand indicators in the US market have helped steel companies’ shipments in 2Q15. How are steel demand indicators currently shaping up? Let’s see.
Housing market is strong
The construction sector is the biggest steel consumer. Most construction indicators have been strong:
- Building permits fell to a seasonally adjusted rate of 1.12 million units in July. However, according to Reuters, the decline was possibly due to the expiration of tax incentives in New York.
- Housing starts continued their good run in July as well. According to the Census Bureau, housing permits touched a seasonally adjusted rate of 1.21 million units in July, the highest since October 2007.
- The architectural billing index, which is a leading indicator of nonresidential construction activity stood at 54.7 in July. This can be seen in the chart above. Though the index fell somewhat from the June reading, it’s still comfortably above 50. Please note that figures above 50 are associated with an increase in architectural billing. The nonresidential construction industry uses steel products including rebars. Nucor (NUE), Commercial Metals Company (CMC), and Gerdau (GGB) are leading rebar suppliers in the US.
Automobile sales moving in top gear
US auto sales are still going strong, hitting a SAAR (seasonally adjusted annual rate) of 17.46 million units in July, according to the data released by WardsAuto. Higher vehicle sales are positive for steel demand. AK Steel gets more than half of its revenues from the automotive industry.
However, even the strong steel demand indicators might not help US steel companies. Steel production in the US continues to sag. We’ll discuss this more in the next part of the series.