Following a steady recovery from the financial crisis of 2008/2009, the US economy is now at a stage where the US Federal Reserve has been able to double interest rates from their historic low of 0.25%, where they have been for the last seven years.
This recovery had been filtering through to an increase in apparent demand for steel in the country with the total in 2014 12% above that of the year before and an 81% increase on the total in the trough year of 2009. This trend does not seem to have continued into this year, however, with the latest forecast for 2015 showing a 3% decline when compared to last year.
What’s more is that so far this year this reduction in demand has been most keenly felt by domestic producers with US crude steel production falling by 10% in Q3 and 9% so far this year to date. At the start of the year, the strength of the US dollar and general health of the economy had encouraged a large growth of imports with Q1 up an incredible 21%. The US government has been quick to recognise the danger to domestic suppliers, however, and have erected trade barriers against cheap foreign imports. This action has been successful and we have seen a 12% decline in imports in Q2 and a 20% crash in imports by Q3. This means that year to date, US imports have declined by 5% which is likely to fall further before the year is out.
The largest decline has been seen in imports from Russia which halved to 587K tonnes in Q3. Other big declines have been seen in shipments from South Korea, down 38%; the UK, falling 57%; and Italy, down 49%. Shipments from China have also declined, falling by 29% but at 555K tonnes, they remain significant with some 164KT of CR flat products being imported along. This helps explain why on Wednesday, the US slapped import duties of up to 227% on imports of cold-rolled flat steel from China.
Although imports into the US from most origin countries declined, shipments did increase from Brazil, who much like China, has been exporting increasing amounts of steel due to a weakening economy hitting demand internally and a depreciating currency making their products comparatively cheaper. Uniquely, the country has also been benefiting from ever lower costs of locally sourced raw material. Overall, imports of steel from Brazil grew by 9% in Q3 to 1.2M tonnes and semi-finished products, which have traditionally dominated imports from the country, have been declining with the growth coming instead from increased imports of hot rolled coil, cold rolled flat products and galvanised flat steel products.
Whilst the decline in US steel demand is of some concern to local producers, the agility and fervour with which the government is able to protect the industry against perceived unfairly priced material being imported from abroad offers a level of protection for them and at the same time likely to increase displaced tonnage hitting the markets of other countries, particularly within the EU where anti-dumping decisions are less rapid.