U.S. Steel Imports Up in July on China Glut: More Pain Ahead?

Imports of steel, which continue to haunt the American steel industry, shoot up roughly 5% from the previous month in July – according to the American Iron and Steel Institute ("AISI"), an association of North American steel makers.

Total steel imports rose in the reported month, reversing a declining trend that was witnessed in the previous five months. July saw a significant rise in imports from China – the world’s top steel producer. Slowing demand at home due to a fragile economy has forced the country to step up steel exports (driven by excess capacity) to world markets with the U.S. being a prime target market.

AISI said that, based on preliminary U.S. Census Bureau data, total U.S. steel imports for July was 3,243,000 net tons, a 4.6% rise from a month ago. That number includes finished steel imports of 2,578,000 net tons, which is also up 3.7% from June.

Estimated market share of finished steel imports was flat on a monthly basis in July at 27%. But year-to-date finished steel import market share was estimated at 31%, which is still higher than 28% clocked for full-year 2014.

The U.S. steel industry, which directly or indirectly supports over a million jobs, saw a year over year jump in finished steel imports for the first seven months of 2015. Finished steel imports, year-to-date, shot up 10% year over year to roughly 20.44 million net tons. However, total imports for the period remain unchanged at around 24.96 million net tons.

Major finished steel products that showed a significant import increase on a monthly comparison basis in July include reinforcing bars (up 57%), plates in coils (up 29%), sheets and strip hot dipped galvanized (up 26%) and cold rolled sheets (up 25%).  

Biggest volumes of finished steel imports in July were from South Korea with 307,000 net tons (down 3% from June), China with 283,000 net tons (up 49%), Turkey with 229,000 net tons (up 42%), Japan with 179,000 net tons (down 2%) and Germany with 145,000 net tons (down 3%).

Three biggest offshore suppliers for the seven-month period were South Korea with 3,367,000 net tons (up 6% year over year), Turkey with 1,837,000 net tons (up 68%) and China with 1,805,000 net tons (up 1%).

Domestic steel producers are still struggling to defend their turf from a flood of low-priced steel imports from foreign manufacturers, especially from China and South Korea. A recovering economy coupled with a stronger dollar has made the U.S. a hotspot for overseas steel makers.

Notwithstanding the U.S. steel industry’s depressed capacity utilization, imports continue to make inroads in the American market due to foreign producers’ overcapacity. U.S. producers have suffered heavily due to high levels of imports, reflected by declined orders, idling of mills and layoffs across the country.

Subsidized steel products are being illegally dumped by foreign steel producers in the American market at unfairly low prices that significantly undercut the prices of U.S. steel makers. In particular, low costs of production (leveraging cheap iron ore) in China have enabled the local producers to sell their product at cheaper rates. This has led to an industry-wide price decline, hurting margins and earnings power of U.S. steel makers in the process.

China’s recent move to devaluate its currency in a bid to crank up its sleeping economy has added more fuel to the fire. The move has sent fresh tremors across the American manufacturing sector as a cheaper yuan will make Chinese exports less expensive in overseas markets. This may trigger accelerated steel exports from China into global markets amid weakening domestic demand as the world’s second-biggest economy continues to sputter. China accounts for around half of global steel output.

While China’s overall exports slumped 8.3% year over year in July, its total steel exports jumped around 21% to 9.73 million metric tons, driven by massive overcapacity. Per Global Trade Information Services, Chinese steel exports surged 27% during the first seven months of 2015 and are expected to top 100 million metric tons this year.

Major U.S. steel producers including Nucor NUE, U.S. Steel X, AK Steel AKS, Steel Dynamics STLD and ArcelorMittal USA – a part of ArcelorMittal MT – have taken a number of steps in the recent past in their ongoing war against cheap imports. The most recent of them came in the form of anti-dumping and countervailing duty petitions that charge seven countries for illegally dumping subsidized hot-rolled steel flat products.

U.S. steel makers continue to actively press Congress to stop unfair trade practices and enforce new trade laws to rescue the ailing American steel industry.

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