U.S. raw steel output for the week ending June 6 ticked up 1.3% on a week-on-week basis as lower production from steel mills in Great Lakes was more than offset by gains in other regions, according to the latest report from the American Iron and Steel Institute ("AISI") - an association of North American steel makers.
The gain follows a 1.8% decline for the week ending May 30. Capacity utilization (a key metric in the steel industry) for the reported week also rose modestly on a weekly comparison basis. But overall year-to-date production still trails that of a year ago.
According to data released by AISI, domestic raw steel production clocked 1,722,000 net tons for the reported week with a capability utilization rate of 72.8%. This compares favorably with production of 1,700,000 net tons and capability utilization rate of 71.9% for the week ending May 30. However, the reported weekly production represents an 8.8% fall from the same period a year ago.
By region, production in the North East for the reported week was up 1.3% from the previous week to 226,000 net tons. Production from Midwest inched up 0.5% to 214,000 net tons while output from the Southern region jumped 8.9% to 602,000 net tons. The Western region produced 87,000 net tons of raw steel, up 8.8% on a weekly basis. Output from Great Lakes sagged 6% to 593,000 net tons, making it the only region to witness lower production for the week.
Adjusted year-to-date production through June 6 was 38,364,000 net tons at a capability utilization rate of 72.3%. This represents a 7.3% decline from 41,394,000 net tons during the same period a year ago. Capability utilization rate for the period also fell from 77.3% recorded last year.
According to AISI, production capacity for the second-quarter 2015 is roughly 30.7 million tons compared with 31.3 million tons a year ago and 30.4 million tons for the first quarter of 2015.
U.S. steel mills remain hamstrung by a deluge of unfairly traded imports of steel products. Surging imports coupled with oversupply in the market is pressurizing steel prices as well as prospects of domestic steel producers including Nucor(NUE)
According to a recent AISI report, domestic steel production tumbled 7.2% year over year in the first five months of 2015. In addition to high levels of low-priced imports, the American steel industry is also hammered by depressed capacity utilization and weak demand in the energy space (a key end-use market) as exploration companies cut their capital expenditure budgets in the face of the oil price slump.
World Steel Association ("WSA") - the international trade body for the iron and steel industry - sees apparent steel use in the U.S. to contract 0.4% year over year to 106.5 million tons in 2015. While demand is expected to rebound next year with a projected 0.7% gain, a stronger dollar may weigh on growth prospects.
While the steel market environment is expected to remain difficult in the U.S. in 2015, strength in the automotive market and a rebound in construction activity augur well for steel demand in the country, providing a much-needed thrust to the domestic steel industry.
Source: Nasdaq.
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