Prospects for US Steel Industry

It is fair to say that the past year has been one of changing fortunes for the global steel industry in general and for the US steel industry in particular.  Although US demand for steel in the first half of the year was fairly subdued, a strong raft of anti-dumping legislation implemented in the latter part of 2015 meant domestic steelmakers enjoyed added protection.  Crude steel production in the first half of 2016 was stable year on year compared with import levels which were 28% lower.

 

The subsequent increase in domestic steel prices once again led buyers to search out value from overseas sources resulting in Q3 import levels being substantially higher, although still 2% below Q3 the previous year, and domestic production falling by 4%. This trend continued into October with production down nearly 5% year on year but early indications show that the general election result may have helped to halt this decline.

 

The surprise election of Donald Trump could have a profound effect on the way that the US trades with the rest of the world.  Trump appears to favour a more aggressive trade policy, regularly citing job losses as a result of imports from other countries, especially China.  As the US is already agile in its application of anti-dumping legislation when necessary, it seems likely that US policy going forward will be geared even further towards protecting domestic interests.

 

The recent high profile case of Ford cancelling its proposed Mexican production plant in favour of one in the US after continued criticism from Trump along with the president-elect already suggesting taxes will be imposed on imported vehicles suggest in the short term at least that US demand for steel looks set to improve and given Trump’s rhetoric, this growth is very likely to be supplied by domestic producers.

 

The long term effect of these protectionist policies is rather more uncertain but in November, the month of the election, US steel production increased by over 6% year on year, the first growth since May.  Going forward, the Australian Department of Industry is now predicting US steel production to grow by 6% this year and a further 13% in 2018 compared to the pre-election forecasts of 3% and 7% respectively.

 

It is just over a week before president-elect Donald Trump takes up his position in the White House and whilst the next five years are very likely to herald a much more protectionist stance to international trade for the US, aiding domestic steel producers in the short term, the long term consequence of this on the global steel industry and steel prices in particular is much more difficult to assess.  In the short term imports are likely to be at reduced levels, adding to the quantities of surplus steel on the international market with the commensurate downward pressure on prices.  Longer term trade restrictions are unlikely to lead to long-term prosperity with innovation and competitiveness on the global market likely to suffer.
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Prospects for US Steel Industry