November steel imports
Previously, we noted that November steel imports came in at a four-year low. However, investors should also be looking at what product categories are witnessing a big fall in imports. In the previous months, although steel imports fell, the major declines were in semi-finished and OCTG (oil country tubular goods) imports.
From the US steel industry’s perspective, lower semi-finished steel imports don’t help much. These products are processed in the US (DIA). If anything, lower semi-finished steel imports point to another slowdown in US steel production. As for OCTG, the imports are falling. The demand for the products fell after the steep fall in energy prices. It’s important to note that OCTG products are used by the energy industry. U.S. Steel (X) and Tenaris S.A. (TS) are the leading OCTG suppliers.
Other product categories
However, there are several encouraging signs in November’s steel imports data. Hot rolled coil imports fell almost 40% YoY (year-over-year). They reached the lowest level in the last two years. You can see this in the above graph. Cold rolled coil imports fell 45% YoY in November. They’re also at the lowest level in almost two years. Hot dipped galvanized steel imports fell more than 22% YoY in November. A fall in the imports of these products should benefit steel companies including Nucor (NUE) and AK Steel (AKS).
Investors looking to diversify the risk of investing in a single security can also consider the SPDR S&P Global Natural Resources ETF (GNR). Almost a quarter of GNR’s holdings are invested in steel and other metal companies.
The US steel industry filed trade cases in all of these three product categories. However, it would be interesting to see how the galvanized steel imports shape up in the coming months. The US Department of Commerce levied less-than-expected anti-dumping duties on Indian and Korean companies. The fear of anti-dumping duties could have been a key driver behind the falling imports in these categories.
In the next part, we’ll look at the recent trend in service center steel inventories.