US Steel July Imports Spike on Brazil Volume Surge, Fall YTD
U.S. steel imports shot up in July on a monthly comparison basis, but were down year over year for the first seven months of 2020 — according to the latest American Iron and Steel Institute ("AISI") report.
The association of North American steel makers noted that total domestic steel imports rose 92% from the previous month in July to roughly 2.69 million net tons. Finished steel imports went up 3.6% to around 1.37 million net tons for the reported month. July saw a significant increase in finished steel imports from Brazil.
However, total and finished domestic steel imports fell 19.2% and 26.1% year over year, respectively, year to date through the end of July 2020. The AISI noted that these figures are based on preliminary Census Bureau data.
The year-to-date decline in imports appears to reflect the impacts of the coronavirus pandemic and 25% tariff on steel imports, which the Trump administration had levied in 2018 under Section 232 of the Trade Expansion Act of 1962.
Meanwhile, finished steel import market share was estimated at 20% in July, per AISI. For the first seven months of 2020, finished steel import market share was estimated at 19%.
For 2020, annualized total and finished steel imports are expected to be 25.9 million net tons (down 7.4% year over year) and 17.2 million net tons (down 18.5%), respectively, AISI noted.
According to AISI, biggest volumes of finished steel imports from offshore for July were South Korea with 158,000 net tons (down 15% from June), Brazil with 88,000 net tons (up 286%), China with 60,000 net tons (up 53%), Turkey with 52,000 net tons (up 76%) and Japan with 50,000 net tons (down 17%). Notably, imports from Brazil shot up from 23,000 net tons in June.
Finished steel products that showed a significant rise in imports on a monthly comparison basis in July are reinforcing bars (up 61%), tin free steel (up 61%), heavy structural shapes (up 51%), tin plate (up 43%) and hot dipped galvanized sheets and strip (up 35%).
U.S. Steel Industry Looking Up on End-Market Recovery
Coronavirus has taken a big bite out of the U.S. steel industry this year. The pandemic squeezed demand for steel across major end-use markets such as construction and automotive during the first half of 2020. Moreover, a slump in crude oil prices hurt demand for steel in the energy space.
The coronavirus-led demand destruction also forced U.S. steel mills to idle operations and scale down production with capacity utilization plummeting to multi-year lows during the first half. U.S. steel prices have also come under pressure this year amid the demand slowdown.
The benchmark hot-rolled coil (“HRC”) prices plummeted to below the $500 per short ton level in April on concerns over the fast-growing pandemic in the United States and demand slowdown amid production shutdowns by automakers. Driven by U.S. steel mills’ price hike actions, HRC prices gained some ground during the June quarter breaking above that level. However, prices have again fallen below $500 per short ton.
Nevertheless, a recovery in market conditions of late from the virus-led slump augurs well for the U.S. steel industry. U.S. automakers began resuming production in May after a nearly two-month shutdown due to the virus crisis. The restart of production is likely to help resuscitate steel demand in this major market. Moreover, the resumption of many projects that were stalled earlier due to labor shortages and supply chain disruptions amid the pandemic is expected to support the revival in the U.S. construction sector. A recovery in end-market demand is also likely to lend support to U.S. steel prices.
Meanwhile, the U.S manufacturing sector is gaining momentum on a recovery in the overall economy as major parts of the country have reopened for business after coronavirus-induced shutdowns.
United States Steel Corporation X, last month, said that automotive original equipment manufacturers are approaching normal production levels and healthy order activity has continued into the third quarter. The company also expects construction demand to remain strong, especially for value-add construction products.
Moreover, Steel Dynamics, Inc. STLD said that it seeing a rise in steel demand as the automotive sector and its related supply chain have restarted production. The company envisions steel demand to improve in the second half of 2020.
Steel Stocks Worth a Wager
A few stocks currently worth considering in the steel space are L.B. Foster Company FSTR, Schnitzer Steel Industries, Inc. SCHN, TimkenSteel Corporation TMST and Olympic Steel, Inc. ZEUS. While L.B. Foster sports a Zacks Rank #1 (Strong Buy), Schnitzer Steel, TimkenSteel and Olympic Steel carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
L.B. Foster delivered an earnings surprise of 4,200% in the last reported quarter. The Zacks Consensus Estimate for the current year also has been revised 161.5% upward over the last 60 days. The stock is also up roughly 23% over the past three months.
Schnitzer Steel delivered an earnings surprise of 41.3%, on average, over the trailing four quarters. The consensus estimate for the current year also has been revised 580% upward over the last 60 days. The stock is also up roughly 24% over the past three months.
TimkenSteel has expected earnings growth of 22.9% for the current year. The Zacks Consensus Estimate for the current year has been revised 48.4% upward over the last 60 days. The company also delivered an earnings surprise of 28.3%, on average, over the trailing four quarters.
Olympic Steel delivered an earnings surprise of 34.5% in the last reported quarter. The consensus estimate for the current year also has been revised 37.1% upward over the last 60 days.
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