While US steel selling values continue to be amongst the highest in the world, domestic steelmakers have lost a large part of the pricing gains they secured in late 2017/early 2018.
It is widely accepted that US steel producers capitalised initially, on the speculation, and then the implementation of strong import protection measures, in March, last year. This enabled domestic mills to pass through a succession of list price hikes with little resistance from buyers. Amid a healthy trading environment, US steel values advanced rapidly.
MEPS contends that the Section 232 measures were the catalyst for the rapid escalation of US steel prices – while playing a leading role in their fall, in the subsequent period.
Domestic scrap-based producers, who were enticed by the rising financial returns, took steps to build new facilities or restart idled capacity. Year-to-date capacity utilisation, in the US, is 81.9 percent, up from 75.6 percent in the equivalent period in 2018. However, in the same timeframe, demand from the automotive industry, notably for passenger cars, and the construction sector, has slowed. This has put negative pressure on local steel selling figures.
Despite existing trade legislation, offshore volumes continue to influence the US steel sector. Significant quantities of foreign material are still entering the country, most notably on the west coast and in the southern states.
The Section 232 measures have, arguably, created a level playing field for foreign, and specifically, new suppliers to target sales in the United States.
A number of political and economic uncertainties exist in the US. The ongoing trade disputes with China and the European Union are doing little to boost market sentiment, amid the expectation of a slowing economy. Cross-border trade with near neighbours, Canada and Mexico, is being adversely affected by the tariffs, despite the recent USMCA deal. Both countries have introduced reciprocal measures against US steel exports. This protectionist climate is likely to continue under the current US administration.
Compared with their global counterparts, US steel prices will remain at elevated levels. This is likely to reduce the competitiveness of US manufacturers, both in local and export markets.