Amid rising trade tensions, improved domestic capacity utilization rates, decreased finished steel imports, and healthy overseas ferrous scrap demand, market participants saw rising steel and scrap prices through the first four months of 2018.
The U.S. Midwest Domestic Hot-Rolled Coil Steel (CRU) Index Futures approached $900 per short ton late in the first quarter while the composite price for No. 1 Heavy Melt rose to $385 per gross ton in late April, up from around $265 per gross ton one year prior, Scrap Price Bulletin
While the Trump administration announced in early May that it is extending tariff exemptions on steel (and aluminum) exports from the European Union, Canada, and
Mexico for another month, steel imports into the U.S. have already slowed this year. According to the American Iron and Steel Institute “year-to-date (YTD) through three months of 2018, total and finished steel imports are 8,690,000 and 6,831,000 net tons (NT), down 3.0% and 1.7%, respectively, vs. the same period in 2017. Annualized total and finished steel imports in 2018 would be 34.8 and 27.3 million NT, down 8.8% and 7.6%, respectively, vs. 2017.” AISI also reports that year-to-date U.S. steel production (through May 5th
) “…was 31,502,000 net tons, at a capability utilization rate of 75.6 percent. That is up 1.7 percent from the 30,971,000 net tons during the same period last year, when the capability utilization rate was 74.4 percent.
In other positive news, U.S. ferrous scrap exports (excluding stainless and alloy steel scrap) during the first quarter of this year reportedly increased 33.6% as compared to Jan-Mar 2017 to more than 3.9 million metric tons, despite a drop-off in trade with China in March. Improved demand from India (+173kt), Malaysia (+113kt), Indonesia (+111kt), and Vietnam (+72kt) all contributed to this year’s gains, along with heavier loadings for markets in the Middle East including Egypt, Saudi Arabia, and Kuwait.
But the driving factor for the rise in YTD ferrous scrap exports has been Turkey.
According to the U.S. trade data, ferrous scrap exports to Turkey during Jan-Mar 2018 approached 980,000 metric tons, an increase of more than 80 percent as compared to the first quarter of last year. Of note, the World Steel Association reported Turkish steel production rose 7.9% year-on-year in the first quarter of 2018 to 9.54 million metric tons. The rise in Turkish steel production and scrap imports from the United States comes at a time when the Turkish lira continues to test new lows against the U.S. dollar.