US steel imports
As we’ve already seen, steel imports have been a big challenge for US steel companies like U.S. Steel (X), AK Steel (AKS), Nucor (NUE), and Commercial Metals Company (CMC). In the recent trade cases, the US steel industry has managed to get stiff anti-dumping duties imposed on some steel products. Chinese steel products especially have been slapped with prohibitive duties, effectively locking out most Chinese steel products from the US market (DIA). However, global overcapacity would mean steel buyers can look at a host of countries to buy steel.
In the short term, trade cases will have some impact on steel imports and help US steelmakers raise their spot offers. However, in the medium term to long term, we might see imports coming in from new locations. There is generally a time lag before import substitution occurs. A similar thing happened for OCTGs (oil country tubular goods), where South Korean exports to the US rose after an anti-dumping duty was imposed on Chinese products.
While steel producers have been crying foul over Chinese steel exports, end users stand to benefit, as they can procure steel at much lower prices from China and other countries. Also, there is not much difference in commodity-grade steel products whether made in China or Europe. Estimates put global steel excess capacity at 600 million–800 million metric tons. To add to that, the relatively higher steel prices in the US only act as a magnet for steel imports. Though the price differential between the US and Chinese steel prices has narrowed, US steel prices are still among the highest in the world. You can see the hot rolled coil prices in different regions in the chart above.
Meanwhile, analyst opinion seems divided on the current rally in steel companies. In our next series, we’ll explore the outlook for US steel companies after the recent run-up.
In the meantime, you can read Are Steel Industry Indicators Showing Strength in 2016? to keep track of the recent steel industry indicators.