Over the first eight weeks of 2017, US steel production averaged 1,730,000 tons per week at an average capacity utilization rate of 72.9%. This is a 71,000 ton per week increase in production and a 2.0% increase in capacity utilization over the same period in 2016. For the week ending February 25th, production reached 1,770,000 tons at a 74.7% capacity utilization. This was the highest production week since June 11th last year.
Figure 1 shows production on the left-hand scale and capacity utilization as a percent on the right-hand scale. In an encouraging sign, production and capacity utilization have been steadily ramping-up so far in 2017. The non-residential construction market outlook looks promising (AIA consensus forecast +5.6%), as does the new home construction market with just 4.2 months of inventory on-hand. Continued strong job creation, buoyant consumer confidence and easy credit access all combine to create high expectations for stronger steel consumption for 2017 and beyond.
Figure 2 presents a map of the US with the five steel producing zones. The Great Lakes and Southern region are the largest producers by a large margin, together accounting for 74.2% of total production YTD. The Great Lakes region posted production growth of 7.3% YTD y/y, while the Southern zone was up a solid 11.9% YTD y/y. The Northeast also recorded growth, up 3.7% YTD y/y. It was a different story for the Midwest and Western regions which posted declines of -11.9% and -5.5% respectively.
At Gerdau, we track US steel production and capacity utilization to keep an eye on the overall health of the US steel industry. We feel it is important to understand the forces that influence steel demand to include the strength of the US economy and import penetration.