Although there was a significant acceleration
in production, iron and steel producers struggled to keep up with demand and
burned through stockpiles.
In the most recent figures published by
the US Bureau of Labor Statistics, the Producer Price Index for Steel Mill
Products dropped 4.9% in March 2022, marking the third month-on-month (MoM)
contraction in the past three months. Upon re-opening the economy, the price of
steel soared in 2021 as demand outpaced supply and the PPI for Steel Mill
products peaked in December 2021, rising 128.0% year-on-year (YoY). In a rush
to meet demand last year, firms rapidly expanded operations following a sharp
slowdown in production in the first half of 2020.
Capital utilisation for iron
and steel product manufacturing dropped to an all-time low of 52.6% in May 2020
at the height of the pandemic and by September 2021, this figure had risen to
85.1%. Although there was a significant acceleration in production, iron and
steel producers struggled to keep up with demand and burned through stockpiles.
After dropping to a two-year low, unfilled orders for iron and steel product
manufacturing increased by 37.1% YoY to a ten-year high in July 2021.
In the latter half of 2021,
the price of steel mill products stabilised and started to ease back in the
first few months of 2022, as supply chain issues that plagued the market
earlier in 2021 eased, thereby reducing pressure on prices. A rapid push to
replenish stocks and an uptick in steel imports then led to an oversupplied
market. According to the American Iron and Steel Institute, total steel imports
rose 43% over 2021. Capacity utilisation relaxed towards the end of 2021 and
into the new year, as capacity utilisation dropped to 77.2% in February 2022.
However, unfilled orders climbed 2.0% MoM in January and February 2022,
indicating steel manufacturers are still having issues with supplying the
market, and supply difficulties remain an issue.
The steel industry is
expected to face new challenges, and supply chain issues are likely to persist
over the remainder of 2022. The advent of the Russian-Ukrainian war and the
following sanctions have added to uncertainty and supply will consequently be
restricted further, with 61% of US pig iron (key input for an Electric Arc
Furnace) imported from Russia and Ukraine combined.