The US is the world’s largest steel importer. The country’s steel imports totaled 30.9 million metric tons last year. US steelmakers, including AK Steel (AKS), U.S. Steel Corporation (X), and Nucor (NUE), see higher levels of steel imports as one of their biggest woes. While the country has imposed several trade actions against steel imports, it continues to be the biggest steel importer globally. In this part, we’ll see what makes the US (IWM) (RUT-INDEX) the largest steel importer.
The above graph shows HRC (hot rolled coil) prices across different regions. Currently, US HRC prices are ~$150 per metric ton higher—compared to the world export price, according to data compiled by SteelBenchmarker. The price differential is even higher for CRC (cold rolled coil). As we noted previously, the HRC-CRC spread in US markets is almost double the historical standards.
The price spread between US and international steel prices creates a juicy price arbitrage for US steel buyers. Being a commodity, there isn’t much difference between steel produced in the US and elsewhere. It holds especially true for the more commodity-grade steel products (CLF).
China accounts for half of the global steel overcapacity. Despite China cutting down on its polluting steel capacity, there’s still a fair bit of global steel overcapacity. The price differential between the US and international steel prices acts as a magnet for steel imports. As we saw in the last few years, the existing trade laws have only provided momentary relief from imports. There was a subsequent increase in imports from new countries. Does that mean that the US needs some strict laws against steel imports? We’ll discuss this in the next part.