U.S. raw steel production for the week ending Aug 29 contracted 2.2% on a week-on-week basis on lower production from steel mills across the nation's two biggest steel-producing regions - Great Lakes and Southern, according to the latest report from the American Iron and Steel Institute ("AISI").
The decline in output follows a 1.5% fall for the week ending Aug 22. Capacity utilization - a key metric in the steel industry - also slipped from the previous week.
Per AISI - an association of North American steel makers - domestic raw steel production was 1,703,000 net tons for the reported week with a capability utilization rate of 71.2%, down from production of 1,742,000 net tons and capability utilization rate of 72.9% for the week ending Aug 22. The reported weekly production also tumbled 11.8% from the same period a year ago.
By regions, output from Great Lakes fell 2.6% on a weekly basis to 643,000 net tons. Production from the Southern district - the second-largest steel-producing region - ticked down 0.5% to 570,000 net tons. Mills in the North East produced 193,000 net tons of raw steel, an 11% slump from the previous week. However, raw steel production went up 2% and 1% in Midwest and Western regions, respectively, to 209,000 net tons and 88,000 net tons, respectively.
Overall year-to-date raw steel production continues to trail the year-ago levels. Adjusted year-to-date production through Aug 29 was 59,216,000 net tons at a capability utilization rate of 72.6%, down 8% from 64,338,000 net tons recorded in the same period a year ago. Capability utilization rate for the period also skid from 78% recorded last year.
American steel mills remain hamstrung by depressed capacity utilization and a deluge of subsidized imports, mostly from China and South Korea. High levels of imports and oversupply in the market are weighing heavily on U.S. steel makers including NucorNUE U.S. SteelX, AK SteelAKS, Steel DynamicsSTLD
and ArcelorMittal USA - a part of ArcelorMittalMT. Steel market fundamentals are expected to remain challenging in the U.S. through the remainder of 2015.
Per a recent AISI report, U.S. steel imports shoot up roughly 5% from the previous month in July on a significant rise in imports from China - the world's top steel producer. China, which accounts for around half of global steel output, stepped up its steel export in July as demand weakened at home due to economic slowdown.
Chinese steel exports jumped around 21% to 9.73 million metric tons in July, driven by massive overcapacity. China's move to devaluate its currency in a bid to lift up its fragile economy has further triggered fears of accelerated steel exports from the country into attractive overseas markets including the U.S.
The U.S. steel industry has also seen a year over year jump in finished steel imports for the first seven months of 2015. Finished steel imports for the period have spiked 10% year over year to roughly 20.44 million net tons.
Estimated year-to-date market share of finished steel import is 31%, higher than 28% recorded for full-year 2014. On the other hand, U.S. steel shipments are down 9.8% year over year so far this year.
Although the U.S. steel industry still remains under the threat of cheaper imports in the wake of a stronger dollar, strength in the automotive market and an upswing in construction activity represent tailwinds for the industry.
Source: NasdaQ
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