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Is US Flat Steel Producers’ Island Party Coming to an End?

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Aug. 25 2016, Updated 11:06 a.m. ET

Flat steel producers

Generally, steel prices across different regions move in tandem with each other. However, the US (DIA) steel industry has been an island of sorts this year. US flat rolled steel prices have risen significantly this year—defying all slowdown talks. Trade protectionism helped steelmakers like U.S. Steel Corporation (X), ArcelorMittal (MT), Nucor (NUE), and AK Steel (AKS) raise their base selling prices several times this year. The US was turned into a virtual island—steel buyers were left with little option but to buy steel from domestic steel mills despite much lower prices globally.

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Party over?

The biggest gains in the steel space this year were seen in flat rolled steel prices where US steel companies managed to get stiff duties imposed on imports from countries including China. However, every party has an expiration date. As we discussed in the previous part, US steel imports rose to a one-year high in July.

Also, we saw a sharp increase in flat steel imports in July. HR (hot rolled coil) imports rose 48%—compared to June. CRC (cold rolled coil) imports rose 7%—compared to June. Notably, in absolute terms, July CRC imports are the highest since September 2015.

Price action

The impact of more imports is pretty visible in spot steel prices. Spot HRC prices have now fallen below $600 per short ton level—they fell $50 per short ton from their June highs. Spot CRC prices are also hovering around $800 per short ton—$40 per short ton below their June highs.

In the next part of the series, we’ll explore how US steel producers are managing their production levels amid the recent surge in steel imports.

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