Steel companies’ 2017 performance
As noted previously, most steel companies (X) (MT), with the exception of AK Steel (AKS), reported a yearly increase in 4Q16 steel shipments. In this article, we’ll look at the different factors that could impact steel companies’ 2017 production and shipment profiles.
President Donald Trump intends to spend ~$1 trillion over the next decade in reviving America’s infrastructure. Investments in bridges, highways, and airports would boost demand for metals like steel and aluminum.
According to Nucor (NUE), President Trump’s proposed trillion-dollar infrastructure investment plan could generate an annual incremental demand of 5 million tons of steel over the next ten years. This is a significant number and represents roughly 5% of the current US steel demand (SPY) (SPX).
US apparent steel demand fell below real demand in 2015 as steel end buyers and service centers went about destocking their inventory. The service center inventory destocking activity continued into 2016 as well. However, given the low inventory levels and the expectations of higher real demand, we could see some inventory restocking in 2017.
Can US steel companies capture incremental demand or could imports steal some market share? Three key trade cases are coming up for hearings in 2017 that could further impact US steel imports.
Currently, trade cases against imports of plates and rebars are being investigated by US authorities. Also, we have the trade case against Chinese steel companies transshipping steel from Vietnam. The outcome of these trade cases would impact steel companies’ 2017 production and shipment profile.
Some steel companies’ 2017 shipments could rise more than the industry average. We’ll discuss this more in the next article.