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US Steel August Imports Drop as Prices Continue Upward Trajectory

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U.S. steel imports dropped in August on a monthly comparison basis, but are up year over year for the first eight months of the year — according to the latest American Iron and Steel Institute ("AISI") report.

Total Steel Imports Down 10% in August

The association of North American steel makers noted that total domestic steel imports fell 10.1% from the previous month in August to roughly 2.77 million net tons. Finished steel imports ticked up 1% to around 2.1 million net tons for the reported month.

Biggest volumes of finished steel imports from offshore for August were South Korea with 163,000 net tons (down 45% from July), Taiwan with 105,000 net tons (up 36%), Germany with 80,000 net tons (up 16%), Japan with 77,000 net tons (up 16%) and Vietnam with 73,000 net tons (down 28%), per AISI.

Meanwhile, total and finished domestic steel imports went up 25.5% and 26.9% year over year, respectively, year to date through the first eight 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 21% in August, flat sequentially. For the first eight months of 2021, finished steel import market share was estimated at 20%.

For 2021, annualized total and finished steel imports are expected to be 30.8 million net tons (up 40.1% year over year) and 21.3 million net tons (up 32.1%), respectively, AISI noted.

Record-high Prices Put U.S. Steel Industry on Driver’s Seat

The U.S. steel industry is reaping the benefits of historically high steel prices, thanks to an upsurge in demand in major end-use markets and tight supply conditions partly due to production disruptions at domestic steel mills and hefty Section 232 tariffs on steel imports.

The coronavirus pandemic led to a sharp drop in demand for steel across major markets such as construction and automotive during the first half last year. A slump in crude oil prices also hurt demand for steel in the energy space. The pandemic-induced 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 virus-led restrictions.

Improved 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. According to AISI, capacity utilization rate clocked 85.2% for the week ending Sep 25.

Strong demand and persistent supply shortages continue to drive U.S. steel prices this year, allowing American steel companies to churn out record profits. The benchmark hot-rolled coil (“HRC”) prices tumbled to multi-year low of roughly $440 per short ton in August 2020 as coronavirus shattered demand in major markets. However, HRC prices started to recover in September 2020 and are on an upswing since then. Prices remain above the $1,900 per short ton level this month. According to Fastmarkets MB, U.S. HRC index was $1,960 per short ton on Sep 29.

Notwithstanding a slowdown in steel consumption in the automotive market amid the ongoing semiconductor crunch, supply constraints due to production disruptions and a series of mill outages and scheduled maintenance are likely to lend support to HRC prices through the remainder of 2021, driving profit margins of domestic steel companies.

Steel Stocks Worth A Look

A few stocks currently worth considering in the steel space are, Nucor Corporation NUE, United States Steel Corporation X, Steel Dynamics, Inc. STLD and Commercial Metals Company CMC, 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 534.4% for the current year. The Zacks Consensus Estimate for earnings for the current year has been revised 21.5% upward over the last 60 days.

U.S. Steel has expected earnings growth rate of 390.6% for the current year. The consensus estimate for the current year has been revised 22.9% upward over the last 60 days.

Steel Dynamics has expected earnings growth rate of 431% for the current year. The Zacks Consensus Estimate for the current year has been revised 16.6% upward over the last 60 days.

Commercial Metals has expected earnings growth rate of 37.1% for the current fiscal year. The consensus estimate for the current fiscal has been revised 3.1% upward over the last 60 days.


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