For the week ending June 3rd, production was 1,749,000 tons at a 75.0% capacity utilization, 1.3 points higher than the year to date (YTD), average. For the first 22 weeks of 2017, US steel production averaged 1,735,000 tons per week at an average capacity utilization rate of 73.7%.
Figure 1 presents 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 thus far in 2017. According to the American Iron and Steel Institute (AISI), current total US capacity stands at 121,264 million tons (mt), down 257,000 tons year on year (y/y). Production is now 67.1% higher than the low point of 800 Mt, the last week of December 2008.
In its April 21st short range outlook, Worldsteel forecasted growth for every region of the world in 2017 for a combined total of 1,535.2 million tonnes, up 1.3% y/y. Worldsteel forecasted 2.2% growth for the NAFTA region to 135.2 million tonnes in 2017 and a further 2.4% growth to 138.5 million tonnes in 2018. The US is expected to remain the second largest steelmaker in the world, (a distant 2nd from China 681.0 million tonnes in 2017), with 94.3 million tonnes in 2017, +3.0% y/y, rising to 97.1 million tonnes in 2018, +2.9% y/y.
Commenting on the outlook, Mr T.V. Narendran, Chairman of the Worldsteel Economics Committee said, “In 2016, steel demand recovery was stronger than expected with the upside mostly coming from China. We believe in 2017 and 2018 we will see a cyclical upturn in steel demand with a continuing recovery in the developed economies and an accelerating growth momentum in the emerging and developing economies. We expect that Russia and Brazil will finally move out of their recessions. However, China, which accounts for 45% of global steel demand, is expected to return to a more subdued growth rate after its recent short uplift. For this reason, overall growth momentum will remain modest.”
Figure 2 presents a map of the US with the five steel producing zones. Year to date as of June 3rd, US raw steel production totaled 38.187 Mt, up 3.3% over the same period last year. The Great Lakes region posted production of 14.571 Mt YTD, a growth rate of 4.5%. The Southern zone was up a robust 7.9% YTD y/y with 13.705 Mt production YTD. The Northeast also recorded growth, up 2.2% YTD y/y. It was a different story for the Midwest and Western regions which posted declines of -9.4% and -6.6% respectively. Momentum (3 month growth rate subtract 12 month growth rate), was 4.9% for the nation. All regions except the Great Lakes (-1.4%), recorded positive momentum YTD.
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.