Steel demand indicators
The Section 232 imports probe’s findings were widely discussed in the US steel industry last month. President Trump could soon formalize a 25% tariff on all steel imports. The move is intended to protect the US steel industry from “unfairly traded steel products.” More than a quarter of US steel demand meets with imports. The pricing differential between US and international steel prices is the key driver of US steel imports.
Expectations of steep tariffs boosted steel stocks (XME)(CLF) U.S. Steel Corporation (X), AK Steel (AKS), and Nucor (NUE). Steel prices, like other commodities, are driven by the underlying supply and demand dynamics in the long term. Speaking of supply, we’ve seen that global steel production seems to have taken a breather this year after the sharp increase in 2017. US steel production is also down year-to-date compared to the corresponding period in 2017. See Checking Up on the Steel Industry’s Supply Equation in 2018 to learn more.
Along with production, we also need to look at the demand side of the equation. While steel supply is relatively easy to gauge, as the World Steel Association releases monthly steel production data, measuring steel demand can be tricky. We need to look at the demand indicators of leading end users, including the construction and automotive sectors. In this series, we’ll look at some key indicators to see how steel demand appears in 1Q18.
Let’s begin by looking at some of the indicators for the US construction sector.