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US Steel Output Up as Utilization Tops 80% on Surging Demand
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U.S. raw steel production expanded on a weekly basis for the week ending May 29 on an increase in capacity utilization to above the important 80% level amid strong domestic demand.
According to the latest American Iron and Steel Institute ("AISI") weekly report, domestic raw steel production was 1,836,000 net tons for the week ending May 29, a 2.4% increase from production of 1,793,000 net tons for the week ending May 22. Reported weekly production also represents a 50.1% surge from production of 1,223,000 for the same period a year ago.
Strong Demand Boosts Capacity Utilization
Capacity utilization — a key metric in the steel industry — was 81.5% for the reported week, rising from the previous week’s reading of 79%, indicating an improvement in activity. Capability utilization rate for the reported week was also significantly up from 54.6% a year ago, per AISI.
Notably, capacity utilization rate cratered to 51.1% in May 2020 — the lowest level in many years — after remaining above the 80% (the minimum rate required for sustained profitability of the steel industry) level in early 2020 as the coronavirus pandemic sapped demand across major steel-consuming markets. Utilization started to improve with a rebound in demand from the slump witnessed during the first half of 2020. Domestic steel production has also picked up on an uptick in capacity utilization.
Meanwhile, adjusted year-to-date production through May 29 was 35,913,000 net tons at a capability utilization rate of 78.1%, up 9.5% from 32,811,000 net tons registered in the same period a year ago, AISI noted. Capability utilization rate for the period is also up from 69.9% recorded last year.
By regions, production from Great Lakes rose roughly 2% on a weekly basis to 635,000 net tons in the reported week. Production in the Southern region also went up roughly 4% to 793,000 net tons. North East saw a roughly 0.7% increase in production to 147,000 net tons for the reported week. Mills in the Midwest region produced 187,000 net tons of raw steel, up around 2% from a week ago. Production fell roughly 7% in the Western region to 74,000 net tons.
U.S. Steel Industry Riding on Soaring Demand, Prices
The U.S. steel industry came roaring back in 2021 after bearing the brunt of the pandemic last year, thanks to a strong revival in domestic demand and skyrocketing steel prices.
Coronavirus gutted demand for steel across major end-use markets such as construction and automotive during the first half of 2020. The pandemic-led demand destruction also forced U.S. steel mills to curtail production with capacity utilization dropping to a multi-year lows during the first half. The coronavirus-induced shutdowns in the North American automotive industry contributed to the production cuts amid a slump in steel demand.
However, strong pent-up demand from major steel-consuming industries and zooming steel prices have pulled the industry out of its pandemic-induced slumber. Demand for steel started to pick up in the third quarter of 2020 with the resumption of operations across major steel-consuming sectors, following the loosening of restrictions.
American steel makers are seeing strong order booking in automotive. Recovery in the automotive industry has accelerated following pandemic-led shutdowns on the back of strong customer demand. The automotive rebound is driving demand for flat-rolled steel products.
The construction sector has also bounced back on the heels of a resumption of projects that were stalled earlier due to supply chain disruptions and manpower shortage. In particular, the non-residential construction market remains resilient.
The demand rebound has contributed to the rise in U.S. steel industry capacity utilization on the restart of idled capacity. Moreover, U.S. steel prices have witnessed a significant upswing driven by an upturn in demand, supply shortages due to the pandemic and higher steel input costs.
The benchmark hot-rolled coil (“HRC”) prices plunged to a pandemic-led multi-year low of roughly $440 per short ton in August 2020. However, HRC prices started to recover from September 2020 and have catapulted to levels not seen since 2008 on U.S. steel mills’ back-to-back price hike actions, tight supply conditions, lower steel imports due to hefty tariffs and solid pent-up demand. Prices cruised above the $1,600 per short ton level for the first time last month as the bull run continued. Notably, HRC prices have shot up more than three-fold from the August 2020 low.
The imbalance between supply and demand has largely contributed to the strong run-up in steel prices. Solid demand, higher raw material costs and supply constraints are likely to continue to boost HRC prices at least through the first half of 2021.
Robust domestic demand and the price rally helped U.S. steel companies deliver strong results in the first quarter. Domestic steel mills are benefiting from spread expansion as a significant spurt in HRC prices has more than offset higher ferrous scrap costs. Strengthening demand and a favorable pricing environment are likely to help U.S. steel producers to continue the momentum in the June quarter.
Nucor has expected earnings growth rate of 238% for the current year. The Zacks Consensus Estimate for earnings for the current year also has been revised 43.6% upward over the last 60 days. The company also surpassed the Zacks Consensus Estimate for earnings in three of the trailing four quarters, the average being 46.2%. Its shares have also surged around 86% over the past six months.
Steel Dynamics has expected earnings growth rate of 196.1% for the current year. It also beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 10.5%. The consensus estimate for the current year also has been revised 39.2% upward over the last 60 days. The stock has also rallied roughly 64% over the past six months.
Schnitzer Steel has expected earnings growth rate of 1,144.2% for the current fiscal year. The Zacks Consensus Estimate for the current fiscal also has been revised 57.4% upward over the last 60 days. The company also surpassed the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 78.5%. Its shares have also shot up around 108% over the past six months.
Olympic Steel has expected earnings growth rate of 1,418.9% for the current year. The consensus estimate for the current year also has been revised 86.3% upward over the last 60 days. The company also surpassed the Zacks Consensus Estimate for earnings in three of the trailing four quarters, the average being 38.7%. The stock has also rallied roughly 120% over the past six months.
Infrastructure Stock Boom to Sweep America
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The only question is “Will you get into the right stocks early when their growth potential is greatest?”
Zacks has released a Special Report to help you do just that, and today it’s free. Discover 7 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.
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US Steel Output Up as Utilization Tops 80% on Surging Demand
U.S. raw steel production expanded on a weekly basis for the week ending May 29 on an increase in capacity utilization to above the important 80% level amid strong domestic demand.
According to the latest American Iron and Steel Institute ("AISI") weekly report, domestic raw steel production was 1,836,000 net tons for the week ending May 29, a 2.4% increase from production of 1,793,000 net tons for the week ending May 22. Reported weekly production also represents a 50.1% surge from production of 1,223,000 for the same period a year ago.
Strong Demand Boosts Capacity Utilization
Capacity utilization — a key metric in the steel industry — was 81.5% for the reported week, rising from the previous week’s reading of 79%, indicating an improvement in activity. Capability utilization rate for the reported week was also significantly up from 54.6% a year ago, per AISI.
Notably, capacity utilization rate cratered to 51.1% in May 2020 — the lowest level in many years — after remaining above the 80% (the minimum rate required for sustained profitability of the steel industry) level in early 2020 as the coronavirus pandemic sapped demand across major steel-consuming markets. Utilization started to improve with a rebound in demand from the slump witnessed during the first half of 2020. Domestic steel production has also picked up on an uptick in capacity utilization.
Meanwhile, adjusted year-to-date production through May 29 was 35,913,000 net tons at a capability utilization rate of 78.1%, up 9.5% from 32,811,000 net tons registered in the same period a year ago, AISI noted. Capability utilization rate for the period is also up from 69.9% recorded last year.
By regions, production from Great Lakes rose roughly 2% on a weekly basis to 635,000 net tons in the reported week. Production in the Southern region also went up roughly 4% to 793,000 net tons. North East saw a roughly 0.7% increase in production to 147,000 net tons for the reported week. Mills in the Midwest region produced 187,000 net tons of raw steel, up around 2% from a week ago. Production fell roughly 7% in the Western region to 74,000 net tons.
U.S. Steel Industry Riding on Soaring Demand, Prices
The U.S. steel industry came roaring back in 2021 after bearing the brunt of the pandemic last year, thanks to a strong revival in domestic demand and skyrocketing steel prices.
Coronavirus gutted demand for steel across major end-use markets such as construction and automotive during the first half of 2020. The pandemic-led demand destruction also forced U.S. steel mills to curtail production with capacity utilization dropping to a multi-year lows during the first half. The coronavirus-induced shutdowns in the North American automotive industry contributed to the production cuts amid a slump in steel demand.
However, strong pent-up demand from major steel-consuming industries and zooming steel prices have pulled the industry out of its pandemic-induced slumber. Demand for steel started to pick up in the third quarter of 2020 with the resumption of operations across major steel-consuming sectors, following the loosening of restrictions.
American steel makers are seeing strong order booking in automotive. Recovery in the automotive industry has accelerated following pandemic-led shutdowns on the back of strong customer demand. The automotive rebound is driving demand for flat-rolled steel products.
The construction sector has also bounced back on the heels of a resumption of projects that were stalled earlier due to supply chain disruptions and manpower shortage. In particular, the non-residential construction market remains resilient.
The demand rebound has contributed to the rise in U.S. steel industry capacity utilization on the restart of idled capacity. Moreover, U.S. steel prices have witnessed a significant upswing driven by an upturn in demand, supply shortages due to the pandemic and higher steel input costs.
The benchmark hot-rolled coil (“HRC”) prices plunged to a pandemic-led multi-year low of roughly $440 per short ton in August 2020. However, HRC prices started to recover from September 2020 and have catapulted to levels not seen since 2008 on U.S. steel mills’ back-to-back price hike actions, tight supply conditions, lower steel imports due to hefty tariffs and solid pent-up demand. Prices cruised above the $1,600 per short ton level for the first time last month as the bull run continued. Notably, HRC prices have shot up more than three-fold from the August 2020 low.
The imbalance between supply and demand has largely contributed to the strong run-up in steel prices. Solid demand, higher raw material costs and supply constraints are likely to continue to boost HRC prices at least through the first half of 2021.
Robust domestic demand and the price rally helped U.S. steel companies deliver strong results in the first quarter. Domestic steel mills are benefiting from spread expansion as a significant spurt in HRC prices has more than offset higher ferrous scrap costs. Strengthening demand and a favorable pricing environment are likely to help U.S. steel producers to continue the momentum in the June quarter.
Steel Stocks Worth a Look
A few stocks currently worth considering in the steel space are Nucor Corporation (NUE - Free Report) , Steel Dynamics, Inc. (STLD - Free Report) , Schnitzer Steel Industries, Inc. and Olympic Steel, Inc. (ZEUS - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Nucor has expected earnings growth rate of 238% for the current year. The Zacks Consensus Estimate for earnings for the current year also has been revised 43.6% upward over the last 60 days. The company also surpassed the Zacks Consensus Estimate for earnings in three of the trailing four quarters, the average being 46.2%. Its shares have also surged around 86% over the past six months.
Steel Dynamics has expected earnings growth rate of 196.1% for the current year. It also beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 10.5%. The consensus estimate for the current year also has been revised 39.2% upward over the last 60 days. The stock has also rallied roughly 64% over the past six months.
Schnitzer Steel has expected earnings growth rate of 1,144.2% for the current fiscal year. The Zacks Consensus Estimate for the current fiscal also has been revised 57.4% upward over the last 60 days. The company also surpassed the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 78.5%. Its shares have also shot up around 108% over the past six months.
Olympic Steel has expected earnings growth rate of 1,418.9% for the current year. The consensus estimate for the current year also has been revised 86.3% upward over the last 60 days. The company also surpassed the Zacks Consensus Estimate for earnings in three of the trailing four quarters, the average being 38.7%. The stock has also rallied roughly 120% over the past six months.
Infrastructure Stock Boom to Sweep America
A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made.
The only question is “Will you get into the right stocks early when their growth potential is greatest?”
Zacks has released a Special Report to help you do just that, and today it’s free. Discover 7 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.
Download FREE: How to Profit from Trillions on Spending for Infrastructure >>