For the week ending March 25th, production reached 1,725,000 tons at a 72.8% capacity utilization, slightly less than the YTD average. For the first twelve weeks of 2017, US steel production averaged 1,738,000 tons per week at an average capacity utilization rate of 73.3%. This was a 72,000 ton per week increase in production over the same period in 2016.

us-capacity-utilizationFigure 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 thus far in 2017. Capacity utilization has increased despite higher steel import levels year on year. According to the US Department of Commerce, overall carbon steel imports (including semi-finished) were up 18.0% y/y. On a month on month basis, imports were down 4.6%. Continued strong job creation, resilient consumer confidence and relaxed credit access coupled with a healthy non-residential construction forecast and expectations of increased infrastructure spending have combined to create expectations for increased steel consumption this

Figure 2 presents a map of the US with the five steel producing zones. Year to date as of March 25th, US raw steel production totaled 20,859 tons, up 5.1% over the same period last year. The Great Lakes region posted production growth of 7.1% YTD y/y, while the Southern zone was up a robust 9.9% YTD y/y. The Northeast also recorded growth, up 3.6% YTD y/y. It was a different story for the Midwest and Western regions which posted declines of -11.5% and -2.9% 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.