Steel production in the United States is up 5 percent so far this year according to estimates from the American Iron and Steel Institute. AISI estimates that for the year-to-date through July 20th, U.S. raw steel production rose to 54.2 million net tons, up from 51.6 million net tons during the corresponding period last year, while the capacity utilization rate increased to 81.1 percent.
While U.S. steel production has been on the rise this year, U.S. imports of total and finished steel products during the first half of 2019 were down nearly 13% and 17%, respectively, as compared to the first half of 2018. U.S. imports of hot rolled sheet are down 27% by volume so far this year, along with diminished imports of hot rolled bars (-31%), standard pipe (-30%), cold rolled sheet (-25%), and plates in coils (-21%). By country, finished steel imports from South Korea are down nearly 17% so far this year and imports from Brazil (-24%), Vietnam (-16%), and China (-9%) are all down significantly, not surprising given the current trade policy landscape.
With the U.S. economy still expanding, domestic steel production up, and steel imports down, one might expect that U.S. steel and ferrous scrap prices would be on the rise as well, but that was not the case in the first half of the year. Fastmarkets AMM’s U.S. hot rolled coil index was down to around $514 per short ton, fob U.S. mill, as of late June. For comparison’s sake, that index was trading as high as $917 per short ton in June 2018. However, the major U.S. steel mills have been pushing for rate hikes in the last several weeks, pushing the HRC index closer to $600 per ton as of late July, according to AMM. Ferrous scrap prices have been faring worse than steel prices so far this year. Heading into July, producer prices for heavy melt scrap declined in 6 out of the preceding 7 months according to figures from the BLS.
One source of softness for ferrous scrap this year has been relatively weaker export demand. According to trade figures from the Commerce Department, U.S. ferrous scrap exports (excluding stainless and alloy steel scrap), were down 11 percent year-on-year during Jan-May 2019 to just under 6.1 million metric tons amid softer demand from Turkey, Mexico, India, Thailand, Egypt, and China, among others.
U.S. Ferrous Scrap Exports (ex-stainless and alloy scrap) by Major Destination
The decline in ferrous scrap exports to India (-49%) this year is particularly noteworthy as India, and South Asia in particular, has been a source of healthy demand growth in recent years. Bangladesh continues to be a growth market for ferrous scrap, although South Korea has been the fastest growing market for U.S. ferrous scrap in 2019 as scrap buys there got off to a fast start despite a relatively modest uptick in South Korean steel production.