Over the first nine weeks of 2017, US steel production averaged 1,733,000 tons per week at an average capacity utilization rate of 72.1%. The most recent four week moving average production was 1,759,000 tons. This was 3.9% higher than the same period in 2016 resulting in a 74.3% capacity utilization rate.
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. Production was higher for both month on month and year on year comparisons for every week thus far in 2017. Figure 2 compares raw steel production for the years 2015, 2016 and 2017 for the first 10 weeks (nine weeks for 2017). The week number is on the X axis and tons per week on the Y axis. Thus far 2017 is getting off to a much better start than 2016. The year 2015 started off strong with capacity utilization north of 76%, then began to collapse falling to 68.9% capacity utilization by week 10.
Figure 3 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 74.3% of total production YTD. The Great Lakes region posted production growth of 7.3% YTD y/y, while the Southern zone was up 11.5% YTD y/y. The Northeast also recorded growth, up 3.3% YTD y/y. It was a different story for the Midwest and Western regions which posted declines of -12.0% and -5.9% respectively. Despite the negative growth in the western regions, momentum was positive for all regions. Overall momentum (defined as the 12 month moving total minus the 3 month moving total), was 11.0%. Momentum ranged from +4.5% in the Great Lakes region to +20.3% in the Midwest.
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.