For the week ending May 20th, US raw steel production totaled 1.741 million tons. Capacity utilization (CU), for the week was 74.7%. On a four week moving average basis, production was 1,739 M at 74.4% CU. With 20 weeks of 2017 behind us, production has averaged 1,733 M per week at 73.5% CU. Production and CU are both stronger than the same period last year when average weekly output was 1.677 M per week at a CU of 71.6%.

2capacity-util-fig1Figure 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 as does the new home construction market with low inventory on-hand. Econometric data for manufacturing is also reporting solid numbers. Continued strong job creation, buoyant consumer confidence and lower import volumes have combined to create increased domestic steel year to date consumption for 2017. The outlook for continued gains looks promising at this time given the solid fundamentals.

Figure 2 2capacity-util-fig2presents 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 74.1% of total production YTD. The Great Lakes region posted production growth of 5.4% YTD y/y, while the Southern zone was up 8.7% YTD y/y. The Northeast also recorded growth, up 2.1% YTD y/y. It was a different story for the Midwest and Western regions which posted declines of -10.8% and -6.1% respectively. Momentum, (3 month moving total minus the 12 month moving total) was positive in all regions. Overall momentum for the nation was 6.5%, ranging between +1.2% for the Great lakes region to +23.2% for the Western zone.

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.