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US Steel Imports Stabilize in April as Supply Lines Dry Out

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US steel imports

According to the preliminary data released by the US Census Bureau, the country imported 2.2 million metric tons of steel products in April. This represents a year-over-year (or YoY) decline of almost 30%. However, steel imports have now started to stabilize on a month-over-month basis. April steel imports are almost similar to what we saw in March. Note that US steel imports started to fall significantly in mid-2015 when US steel companies started to aggressively file trade cases. Since May 2015, US steel imports have fallen by an average of 27% YoY each month.

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Impact on steel companies

Falling steel imports coupled with last year’s supply chain destocking basically left steel buyers high and dry. To add to their woes, the first quarter is generally strong in terms of steel demand. As existing import supply lines have dried out, steel buyers are left in a literal short squeeze. Steel producers, who had been at the receiving end of falling steel prices last year, have made the most of this opportunity.

Higher steel prices

Steel companies like U.S. Steel (X) and AK Steel (AKS) have raised their base selling prices several times this year. Spot HRC (or hot rolled coil) prices have risen more than 65% this year and are currently at the highest level since December 2014. Spot CRC (cold rolled coil) prices have also increased more than 63% so far this year. After flat steel products, long products have also joined the party. Rebar prices have also seen some upward momentum, which was long overdue, as steel scrap prices have been rising without a commensurate increase in rebar prices.

In the next and final part of the series, we’ll see how steel imports are playing out across key product categories.

Investors who want to avoid the hassles of picking individual stocks can also consider the SPDR S&P Metals and Mining ETF (XME). Currently, XME has invested more than half of its holdings in US-based steel companies. Together, Reliance Steel & Aluminum (RS) and Cliffs Natural Resources (CLF) form 9.8% of XME’s portfolio.

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