U.S. steel imports dropped in October on a monthly comparison basis, but are up year over year for the first ten months of the year — according to the latest American Iron and Steel Institute ("AISI") report.
Total Steel Imports Decline 17% in October
The association of North American steel makers noted yesterday that total domestic steel imports fell 16.7% from the previous month in October to roughly 2.71 million net tons. Finished steel imports also declined 6% to around 2.32 million net tons for the reported month.
Biggest volumes of finished steel imports from offshore for October were South Korea with 203,000 net tons (down 32% from September), Turkey with 149,000 net tons (up 26%), Vietnam with 110,000 net tons (up 41%), Germany with 83,000 net tons (down 6%), and Japan with 80,000 net tons (down 3%), per AISI. Meanwhile, total and finished domestic steel imports went up 38.5% and 39.6% year over year, respectively, year to date through the first ten months of 2021. The AISI noted that these figures are based on preliminary Census Bureau data. According to AISI, finished steel import market share was estimated at 24% in October, down from 25% in September. For the first ten months of 2021, finished steel import market share was estimated at 21%. For 2021, annualized total and finished steel imports are expected to be 31.8 million net tons (up 44.6% year over year) and 22.8 million net tons (up 41.4%), respectively, AISI noted. Industry Fundamentals Remain Favorable, But Prices Losing Steam
The American steel industry reaped the benefits of record-high steel prices this year, courtesy of an upsurge in demand in major end-use markets and tight supply conditions partly due to production disruptions at domestic steel mills and sizable Section 232 tariffs on steel imports.
The pandemic led to a sharp decline in demand for steel across major markets such as construction and automotive during the first half of 2020. The virus-led demand shocks also forced U.S. steel mills to curtail production with capacity utilization dropping to multi-year lows. However, demand for steel picked up as major steel-consuming sectors regained their footing following the easing of the coronavirus-induced restrictions. An upturn in end-market demand has also helped U.S. steel industry capacity utilization rate to break above the important 80% level after plunging to 51.1% in May 2020 — the lowest level in many years. U.S. capacity utilization rate currently remains close to the 85% level amid strong domestic demand. According to AISI, capacity utilization rate clocked 84.3% for the week ending Nov 20. Strong demand and persistent supply shortages have also led to a spike in U.S. steel prices this year to historically high levels, allowing U.S. steel companies to churn out record profits despite an uptick in costs of raw materials including ferrous scrap and headwinds from supply-chain and logistics issues. After plummeting to a pandemic-led low of roughly $440 per short ton in August 2020, the benchmark hot-rolled coil (“HRC”) prices witnessed a significant rally, breaking above the $1,900 per short ton level on the back of a mismatch between supply and demand. The upswing in U.S. steel prices also created an unprecedented price arbitrage between U.S. and international prices, thereby attracting imports of lower-priced foreign steel. The strong price arbitrage triggered more steel shipments to U.S. shores this year despite the hefty tariffs. However, HRC prices have come under pressure since last month after peaking in September 2021, pulled down by a downturn in demand in automotive resulting from production cuts by carmakers in the wake of the semiconductor shortage. However, prices remain elevated notwithstanding the recent declines, currently hovering near $1,800 per short ton. Despite a slowdown in steel demand in the automotive space amid the ongoing chip crunch, healthy demand in other end markets including construction and supply disruptions due to mill outages and scheduled maintenance are likely to lend support to HRC prices through the balance of 2021, driving profit margins of U.S. steel companies in the fourth quarter. Steel Stocks Worth Considering
A few stocks currently worth a look in the steel space are
Schnitzer Steel Industries, Inc. ( SCHN Quick Quote SCHN - Free Report) , Nucor Corporation ( NUE Quick Quote NUE - Free Report) , Commercial Metals Company ( CMC Quick Quote CMC - Free Report) and TimkenSteel Corporation ( TMST Quick Quote TMST - Free Report) . Schnitzer Steel sports a Zacks Rank #1 (Strong Buy). The Zacks Consensus Estimate for SCHN’s current-year earnings has been revised 12.8% upward over the last 60 days. You can see . the complete list of today’s Zacks #1 Rank stocks here Schnitzer Steel beat the Zacks Consensus Estimate for earnings in three of the last four quarters while missing once. It has a trailing four-quarter earnings surprise of roughly 25.6%, on average. SCHN shares have surged around 106% over the past year. Nucor, carrying a Zacks Rank #2 (Buy), has a projected earnings growth rate of 583.5% for the current year. NUE's consensus estimate for the current year has been revised 7.7% upward over the last 60 days. Nucor has a trailing four-quarter earnings surprise of roughly 2.7%, on average. NUE has rallied around 111% in a year. Commercial Metals carries a Zacks Rank #2 and has an expected earnings growth rate of 4.8% for the current fiscal year. The consensus estimate for CMC's current-year earnings has been revised 10.7% upward over the last 60 days. Commercial Metals beat the Zacks Consensus Estimate for earnings in three of the last four quarters while missing once. It has a trailing four-quarter earnings surprise of roughly 7.4%, on average. CMC has rallied around 62% over the past year. TimkenSteel carries a Zacks Rank #2 and has a projected earnings growth rate of 425.8% for the current year. The Zacks Consensus Estimate for TMST’s current-year earnings has been revised 22.7% upward over the last 60 days. TimkenSteel beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 59.2%. TMST shares have surged around 213% in a year.