Contrary to expectations earlier this year that the weak dollar would boost exports and shield domestic producers from imports, it looks like US imports are set to rise again, according to the Steel Business Briefing. Sighting import license applications SBB says US applications for April came in at 2.64m metric tons, 16% higher than the March preliminary import count of 2.28m tons, which in turn was higher than February. Interestingly, this is despite a continued decline in steel imports from China, suggesting the export taxes imposed in January by the Chinese authorities are having theÃ‚Â desired effect. For April, China will likely fall to fifth place among the largest steel exporters to the US at 168,000 tons. That lags behind Canada at 646,000 tons, Mexico at 239,000 tons, Japan at 193,000 tons, and Korea at 172,000 tonsÃ‚Â — based on the license applications.
So if imports are rising, does this mean increased competition for domestic producers and lower prices for consumers in the months ahead? Not yet, as strong global demand, still rising raw material costs and capacity issues mean prices will be high for the second and third quarter at least.
The question many consumers are asking is to what extent are price rises purely a reflection of rising raw material costs and to what extent are producers taking advantage of the low level of imports to raise margins. Don’t take too much notice of what producers say to their clients; look more to what they are saying to the investor market. Vertically integrated mills like US Steel are benefiting from controlling some of their own raw material costs so it isÃ‚Â no surprise they are making record margins and their share price has increased 10 fold in the last five years (restructuring has also played a part in improved profitability it has to be said).Ã‚Â But their rival Nucor which is a scrap based producer should be suffering terribly from the high price and scarcity of scrap. Not so, however, as Nucor profits and earnings per share have been rising steadily as the company passes on raw material prices rises and then adds a little for the house.
At what point will the beleaguered consumer and distributor market see an easing of supply and stability in prices? There are too many contributing factors to call that one but certainly a rise in imports is a good development, a little competition in supplies may just temper some of the rises planned this summer.