Everybody who has watched the industry knows that U.S. steel was almost on its deathbed during the Recession in 2009. Since that time, the national economy has returned to a far better health status, and many expected the domestic steel industry to follow the same path.
As of July 2014 the industry continues a solid pattern of moving in the right direction with almost a 7 percent growth increase in 2014. Yet the rhetoric and chatter about how the world is at the U.S. steel market’s doors continues to resonate, making one wonder if U.S. steel is still fragile and pending a fatal collapse.
Going forward into the second half of 2014, one can expect the following in the U.S. steel industry. The rate at which American industrial and commercial buyers bring in imported steel products will continue to rise.
As soon as the economy started to create more income for businesses, they went back to buying overseas versus domestic, and that trend continues to follow an upward climb, if a bit jumpy. That means competition for U.S. steel products is alive and well.
In the same vein, U.S. steel exports will continue to stay flat as they have for the last three years. The U.S. has not really produced a reason for international buyers to increase their positions, so the U.S. product is often undercut by outside competitors on the global market.
On a bit of a change, one can expect the U.S. importing of Chinese steel to go down. There’s been quite a bit of shifting as American companies have more income to spend, so they don’t need to go with the cheapest seller as much.
That creates new domestic opportunity for better quality U.S. steel to win homeland customers. China’s not too worried about the change; their export levels continue to climb significantly, and European as well as other buyers are making up the difference.
Unfortunately, if someone is expecting a big market breakthrough from U.S. steel, it’s not likely to happen in 2014. Instead of aggressively pushing, the U.S. industry seems to be stuck in tepid waters, maintaining the same level of U.S. crude steel production that it has had since January 2012.
At the same time, global steel production is rising rapidly, which means more outside players in other countries are entering or expanding their play in the global market. If U.S. industry players don’t move quickly, they will likely see continued erosion of new market opportunities going instead to companies of other countries.
The saving grace for U.S. steel is that the domestic consumption factor is also increasing, generating purchases and increased sales at home. Since April 2009 domestic steel consumption has grown a solid 5.5 million metric tons through July 2014. If this trend continues into 2015, it will likely be used as the offset for losses outside the country or on the global market.
So while the U.S. steel industry has recovered since the 2009 Recession, it does not seem to be making the most of market opportunity, leaving quite a bit open to outside players to take over. While U.S. consumption is the clear offset, it leaves U.S. steel vulnerable to quick market changes and not enough diversification to offset the change.
Photo by Payton Chung / CC 2.0