US Steel Firms Lead the World

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This may sound like a sound bite from way back, but the US steel industry is leading the world. Not that the US steel industry is not a highly efficient, environmentally responsible and technologically innovative exponent of the art of steelmaking — it is all of those things — but we talk here of good old-fashioned growth and capacity utilization.

Thanks in large part to judicious control of capacity and a strong performance from the automotive sector, as well as export-oriented and natural resource-based sectors, CRU is reported as saying that the US steel industry is almost alone in remaining in positive territory both last year and 2012 with production up 5.7 percent to 7.6 million tons in January.

In spite of the US rise, world crude steel production fell 7.8 percent to 117 million tons in January, compared with the same month last year, based on World Steel Association data, Reuters reported. This fall was led by China’s fall in crude steel output, which plunged 13 percent in the same period to 52.1 million tons. China’s manufacturing sector contracted in February for the fourth straight month, according to the FT, as new export orders dropped sharply in the face of the euro-area debt crisis and slow or stagnant growth in export markets.

Japan Also Hit…

China is far from alone. A strong yen has also affected Japan’s export competitiveness and has weighed on Japanese steelmakers’ profits. Last year, competition from other Asian producers and weaker domestic demand (due to a migration of Japanese manufacturers to lower-cost Asia countries on top of the damage caused by the tsunami) hit the country’s steel industry hard.

The strong yen is hitting a host of industries from automotive to steel production, but steelmakers with their narrow margins have found export markets particularly tough this year, with steel production down 10.6 percent year on year to 8.6 million tons in January.

…Not To Mention Europe

The same drop in demand that Asian steelmakers have been seeing from the eurozone has also hit steelmakers in Europe, as demand dropped 1.3 percent in 2011 with a forecast of a further 2.0 percent fall in 2012.

Steel production in the region declined 5.6 percent to 13.9 million tons in January on weak industrial demand, prompting ArcelorMittal to say it is very unlikely that idled or closed European plants will be re-started this year. The world’s largest steelmaker is structurally over-exposed to the European market, with some 40-45 percent of its output coming from the region last year, a percentage the firm says it will lower as it concentrates expansion on emerging markets, and the only area it is making real money from at the moment – iron ore.

Meanwhile, as a general easing of global raw material costs works its way through to the US market and the domestic recovery continues at a steady — if unspectacular — pace, US steelmakers can look forward to better prospects this year than many of their competitors around the world.

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