For those of you steel industry observers, nothing has appeared as dramatic as the June price drops for steel scrap.
So we note with interest the latest trends involving steel imports as reported by the International Trade Administration and their impact on both domestic steel pricing as well as the future of steel prices for the balance of this year and into next year.
Though this month saw a spate of notable increases, the ones of greatest interest to us relate to the increase in plates in coils from Russia (growing 236 percent this year up from 11.7 thousand metric tons during the prior six months to 39.6 thousand metric tons during the current six month period — we’ll come to the reason why we have interest in this momentarily), and line pipe from Greece, growing 379 percent from 3.8 thousand metric tons during the prior six month period to 18.3 thousand metric tons in the current six-month period.
Notable increases include plates from multiple locations, including Brazil and Turkey growing 178 percent and 176 percent respectively.
Ironically, rebar imports from Turkey as of April saw a 293 percent increase during the six-month period through April 30 from 23 thousand metric tons to nearly 92 thousand metric tons, but by May, those numbers had fallen by half.
So What Gives?
Our quick analysis would suggest that (higher) import levels during the first few months of 2012 have more to do with foreign producers riding the cyclical steel price wave that has taken prices up beginning in the fourth quarter on through the first month or so of the second quarter.
This trend has occurred over the past couple of years. Because rebar imports depend upon US steel scrap supplies (see our previous article on recent scrap price trends), now that scrap prices have fallen off, we’d expect US rebar imports to further decline. In addition, construction market indicators suggest continued downward price pressure:
Source: Gerdau Market Update
In fact, our own MetalMiner IndX℠ Construction MMI® for June suggested metals prices within the construction sector had lost some steam:
Source: MetalMiner IndX
However, we have only one data point and July/August numbers may tell a different story.
About Those Imports
According to Peter Wright of Gerdau Market Update in his report of June 14, “the export market has been leading domestic scrap prices down for all of this year,” yet rebar prices have not collapsed, based on this chart:
Source: Gerdau Market Update
However, rebar price trends in Asia (which have come down slightly) will continue to put pressure on rebar prices globally.
Nevertheless, US steel producers have cause for concern. This chart, also from the latest International Trade Administration Steel Market Steel Industry Executive Summary for May 2012, shows the earnings health of the domestic steel industry:
Source: International Trade Administration
These producers have hardly set the world on fire. Downward earnings guidance by many of the steel producers, an unsigned highway transportation bill, a falling euro against the dollar, declining metals prices across the board, and import surges will remain closely watched.
We will follow up this story after the US Department of Commerce Import Administration updates its numbers for June.