U.S. MANUFACTURERS ZAPPED BY SHORTAGES OF EXPENSIVE STEEL
Steel is in short supply in the US and prices are surging. Unfilled orders for steel in the last quarter were at the highest level in five years, while inventories were near a 3-1/2-year low, Census Bureau says.
The benchmark price for hot-rolled steel rose to $1,176 per metric ton (MT) this month, its highest level in at least 13 years, Rajesh Kumar Singh reported for Reuters.
Soaring prices are driving up costs and squeezing profits at steel-consuming manufacturers, provoking a new round of calls to end former President Donald Trump’s steel tariffs. “Our members have been reporting that they have never seen such chaos in the steel market,” said Paul Nathanson, executive director at Coalition of American Metal Manufacturers and Users.
The group, which represents more than 30,000 companies in the manufacturing sector and downstream supply chains, this month asked President Joe Biden to terminate Trump’s metal tariffs.
Domestic steel mills that idled furnaces last year amid fears of a prolonged pandemic-induced economic downturn have been slow in ramping up production, despite a recovery in demand for cars and trucks, appliances, and other steel products. Capacity utilization rates at steel mills - a measure of how fully production capacity is being used – has moved up to 75% after falling to 56% in the second quarter of 2020 but still way below 82% in last February. Steel shipments are up, but still below last year’s levels.
Record-high prices are turning out to be a bonanza for steel producers. Shares of American steel makers have gained 65% since last August. An analysis by rating agency Fitch shows US steel makers enjoyed a profit margin of 45% in January. Nucor expects to post the highest-ever first- quarter profit.
Steel industry and union groups last month urged Biden to keep the steel tariffs in place, calling them "essential" to the domestic industry. Steel producers are facing their own higher costs following a rise in scrap and iron ore prices.
US steel prices are 68% higher than the global market price and almost double China’s, even with prices in both China and Europe up over 80% from their pandemic-induced lows. The price gap is so wide that even with a 25% tariff, it would be cheaper to import than buy from domestic mills. The US imported 18% of its steel needs last year.