US steel demand indicators, especially from the housing and automotive sectors, have shown signs of peaking growth. The Fed’s increase in interest rates should affect housing affordability, weighing demand down.
Investment in nonresidential construction is also taking a hit. During the third quarter, nonresidential fixed investment increased at an annualized rate of 0.8%, compared to growth of 11.5% and 8.7% in the first and second quarters, respectively.
According to a study from Business Forward, US steel consumers are paying 17.2% more for hot-rolled and cold-rolled steel than their foreign competitors. The report also says that the difference between US and competitors’ prices has gotten 1.8 times larger since February.
CRU, a leading steel industry research firm, expects a further fall in US steel demand as consumers choose to import finished products rather than buying raw materials domestically or importing it. According to CRU’s principal steel analyst, Josh Spoores, “You also will see substitution and once that comes, it is challenging for a switch back.”
However, while steel demand could remain supportive in the medium term, rising interest rates and higher steel prices have affected US steel demand. Amid the seasonal fourth-quarter demand slowdown, incremental production is coming in from U.S. Steel Corporation’s (X) Granite City, Illinois, facility, which could add to steel supply and lead to lower prices.