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US Steel Imports Surge in April, Coronavirus Overhang Remains
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U.S. steel imports shot up in April on a monthly comparison basis, but were down year over year for the first four months of 2020 — according to the latest American Iron and Steel Institute ("AISI") report.
The association of North American steel makers noted that total domestic steel imports rose 58.2% from the previous month in April to roughly 2.77 million net tons. Finished steel imports, however, dipped 13.5% to around 1.31 million net tons for the reported month. April saw a significant increase in finished steel imports from Brazil.
Total and finished domestic steel imports fell 20.3% and 28.2% year over year, respectively, year to date through the end of April 2020. The AISI noted that these figures are based on preliminary Census Bureau data.
The year-to-date decline in imports appears to reflect the impacts of the coronavirus pandemic and 25% tariff on steel imports, which the Trump administration had levied in 2018 under Section 232 of the Trade Expansion Act of 1962.
Meanwhile, finished steel import market share was estimated at 21% in April, up from 17% a month ago, per AISI. For the first four months of 2020, finished steel import market share was estimated at 18%.
For 2020, annualized total and finished steel imports are expected to be 27.6 million net tons (down 1.4% year over year) and 17.5 million net tons (down 17.1%), respectively, AISI noted.
According to AISI, biggest volumes of finished steel imports from offshore for April were South Korea with 161,000 net tons (down 22% from March), Brazil with 69,000 net tons (up 388%), Japan with 68,000 net tons (up 21%), Germany with 64,000 net tons (down 7%), and Turkey with 53,000 net tons (up 62%).
Finished steel products that showed a significant rise in imports on a monthly comparison basis in April are heavy structural shapes (up 57%), reinforcing bars (up 54%), sheets and strip all other metallic coatings (up 31%) and tin plate (up 14%).
Coronavirus Taking Toll on U.S. Steel Industry
The U.S. steel industry is bearing the brunt of the coronavirus pandemic. The deadly virus outbreak has dampened the fragile recovery in the U.S. steel industry, which reeled under the effects of a sharp decline in domestic steel prices and damaging impacts of the Sino-U.S. trade war last year.
The pandemic, which has so far infected more than 5.8 million people globally, has led to a downswing in U.S. steel prices amid ebbing demand across major markets such as automotive and construction. After gaining some ground in late 2019, domestic steel prices have come under pressure this year amid the virus crisis. The benchmark hot-rolled coil steel prices retreated to multi-year lows on concerns over the fast-growing pandemic in the United States and demand slowdown amid production shutdowns by automakers.
While U.S. steel prices have gained some traction over the past few weeks on the back of steel mills’ price hike actions and higher scrap prices, the current muted demand environment does not look supportive for a significant rebound in prices over the near term.
Moreover, the slowdown in the automotive industry amid the virus plight does not augur well for steel demand. Moreover, a slump in crude oil prices has hurt demand for steel in the energy space. Some of the major energy companies have slashed their capital spending in the wake of the oil price rout.
In response to the oil collapse, United States Steel Corp. (X - Free Report) has decided to idle all or most of Lone Star Tubular Operations and Lorain Tubular Operations. A few other steel makers have also idled operations in the wake of falling demand across major end-markets.
Leading integrated producer of iron ore and steel, Cleveland-Cliffs Inc. (CLF - Free Report) , which completed the purchase of AK Steel earlier this year, is temporarily idling production at two of its iron ore mining operations due to weak market conditions. The company has decided to adjust the production of iron ore during the first half of the year.
Softening demand across major end markets spells problems for the U.S. steel industry. U.S. steel industry capacity utilization has plummeted to multi-year lows as the pandemic has decimated demand. The coronavirus-led demand destruction has forced domestic steel mills to idle operations and scale down production.
Capacity utilization rate — a major indicator of the health of the U.S. steel industry — slumped to 53.2% for the week ending May 23 from 80.8% a year ago, per AISI. Domestic raw steel production clocked 1,191,000 net tons for the week, reflecting a 36.6% drop from production of 1,880,000 net tons logged for the same period a year ago. The prospects of a recovery in end-market demand look slim amid the current difficult global environment.
Meanwhile, U.S. steel stocks, which gained some momentum toward the end of 2019 on the back of an uptick in domestic steel prices and the de-escalation in trade tensions, have gotten hammered this year amid the pandemic. Shares of major American steel makers such as United States Steel, Nucor Corporation (NUE - Free Report) and Steel Dynamics, Inc. (STLD - Free Report) have tanked roughly 28%, 24% and 21%, respectively, year to date.
While United States Steel and Nucor currently carry a Zacks Rank #3 (Hold), Steel Dynamics has a Zacks Rank #4 (Sell).
The Zacks Steel Producers industry has also lagged both the Zacks S&P 500 composite and the broader Zacks Basic Materials sector so far this year. The industry has declined 32% over this period compared with the S&P 500’s decline of 5.7% and broader sector’s fall of 11.9%.
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Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
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US Steel Imports Surge in April, Coronavirus Overhang Remains
U.S. steel imports shot up in April on a monthly comparison basis, but were down year over year for the first four months of 2020 — according to the latest American Iron and Steel Institute ("AISI") report.
The association of North American steel makers noted that total domestic steel imports rose 58.2% from the previous month in April to roughly 2.77 million net tons. Finished steel imports, however, dipped 13.5% to around 1.31 million net tons for the reported month. April saw a significant increase in finished steel imports from Brazil.
Total and finished domestic steel imports fell 20.3% and 28.2% year over year, respectively, year to date through the end of April 2020. The AISI noted that these figures are based on preliminary Census Bureau data.
The year-to-date decline in imports appears to reflect the impacts of the coronavirus pandemic and 25% tariff on steel imports, which the Trump administration had levied in 2018 under Section 232 of the Trade Expansion Act of 1962.
Meanwhile, finished steel import market share was estimated at 21% in April, up from 17% a month ago, per AISI. For the first four months of 2020, finished steel import market share was estimated at 18%.
For 2020, annualized total and finished steel imports are expected to be 27.6 million net tons (down 1.4% year over year) and 17.5 million net tons (down 17.1%), respectively, AISI noted.
According to AISI, biggest volumes of finished steel imports from offshore for April were South Korea with 161,000 net tons (down 22% from March), Brazil with 69,000 net tons (up 388%), Japan with 68,000 net tons (up 21%), Germany with 64,000 net tons (down 7%), and Turkey with 53,000 net tons (up 62%).
Finished steel products that showed a significant rise in imports on a monthly comparison basis in April are heavy structural shapes (up 57%), reinforcing bars (up 54%), sheets and strip all other metallic coatings (up 31%) and tin plate (up 14%).
Coronavirus Taking Toll on U.S. Steel Industry
The U.S. steel industry is bearing the brunt of the coronavirus pandemic. The deadly virus outbreak has dampened the fragile recovery in the U.S. steel industry, which reeled under the effects of a sharp decline in domestic steel prices and damaging impacts of the Sino-U.S. trade war last year.
The pandemic, which has so far infected more than 5.8 million people globally, has led to a downswing in U.S. steel prices amid ebbing demand across major markets such as automotive and construction. After gaining some ground in late 2019, domestic steel prices have come under pressure this year amid the virus crisis. The benchmark hot-rolled coil steel prices retreated to multi-year lows on concerns over the fast-growing pandemic in the United States and demand slowdown amid production shutdowns by automakers.
While U.S. steel prices have gained some traction over the past few weeks on the back of steel mills’ price hike actions and higher scrap prices, the current muted demand environment does not look supportive for a significant rebound in prices over the near term.
Moreover, the slowdown in the automotive industry amid the virus plight does not augur well for steel demand. Moreover, a slump in crude oil prices has hurt demand for steel in the energy space. Some of the major energy companies have slashed their capital spending in the wake of the oil price rout.
In response to the oil collapse, United States Steel Corp. (X - Free Report) has decided to idle all or most of Lone Star Tubular Operations and Lorain Tubular Operations. A few other steel makers have also idled operations in the wake of falling demand across major end-markets.
Leading integrated producer of iron ore and steel, Cleveland-Cliffs Inc. (CLF - Free Report) , which completed the purchase of AK Steel earlier this year, is temporarily idling production at two of its iron ore mining operations due to weak market conditions. The company has decided to adjust the production of iron ore during the first half of the year.
Softening demand across major end markets spells problems for the U.S. steel industry. U.S. steel industry capacity utilization has plummeted to multi-year lows as the pandemic has decimated demand. The coronavirus-led demand destruction has forced domestic steel mills to idle operations and scale down production.
Capacity utilization rate — a major indicator of the health of the U.S. steel industry — slumped to 53.2% for the week ending May 23 from 80.8% a year ago, per AISI. Domestic raw steel production clocked 1,191,000 net tons for the week, reflecting a 36.6% drop from production of 1,880,000 net tons logged for the same period a year ago. The prospects of a recovery in end-market demand look slim amid the current difficult global environment.
Meanwhile, U.S. steel stocks, which gained some momentum toward the end of 2019 on the back of an uptick in domestic steel prices and the de-escalation in trade tensions, have gotten hammered this year amid the pandemic. Shares of major American steel makers such as United States Steel, Nucor Corporation (NUE - Free Report) and Steel Dynamics, Inc. (STLD - Free Report) have tanked roughly 28%, 24% and 21%, respectively, year to date.
While United States Steel and Nucor currently carry a Zacks Rank #3 (Hold), Steel Dynamics has a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Steel Producers industry has also lagged both the Zacks S&P 500 composite and the broader Zacks Basic Materials sector so far this year. The industry has declined 32% over this period compared with the S&P 500’s decline of 5.7% and broader sector’s fall of 11.9%.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>