Steel producers say demand growth in the US may slow in 2019 from last year's torrid, tariff-fueled pace as strong machinery and construction demand will be partly countered by weaker auto sales amid signs of a slowing economy.
Global steelmaker ArcelorMittal expects steel demand in the US to grow by 0.5-1.5pc in 2019, lower than its 1.7pc growth last year. The company operates six steel mills in the US.
Recent research by KeyBanc says carbon steel growth in the US is expected to be 1-1.5pc in 2019, down by half from 2-3pc growth in 2018. Automotive sales are a large component of the slowdown, with Keybanc expecting sales to fall to 16.6mn vehicles in 2019 from 17.2mn vehicles sold last year.
Keybanc also points to a flattening in demand from the oil and gas industry, which has required hundreds of miles of pipelines and other materials to fuel growth in areas like West Texas' Permian Basin oil field.
"We're comfortable that we'll have another good year," US Steel chief executive David Burritt said on a recent conference call. "It's just that we do have these headwinds," including cost pressure on raw materials and lower flat rolled pricing.
Still, Pittsburgh-based US Steel expects shipments for its flat-rolled segment to increase by 1mn st to 11.5mn st this year.
The US imposition of 25pc tariffs on imported steel last year helped boost hot-rolled coil (HRC) prices by 20pc to more than $900/st by June 2018, but they have since receded to around $700/st. The tariffs also fueled a rise in US steel operating rates, which averaged 77.7pc of capacity for 2018, up from 73.9pc in 2017, according to the American Iron and Steel Institute (AISI). US weekly raw steel capacity utilization reached a seven-year high in early March at 83.4pc.
In full-year 2018 US steel production increased 7.1pc to 96.35mn st, according to AISI data.
Taking into account the effect of the steel tariffs beginning in late March last year, total steel imports were down by 11.3pc to 33.7mn st, down from the 38mn st imported in 2017. The 2018 figures came in 2.1pc higher than 2016.
The tariffs boosted both North Carolina-based steelmaker Nucor and Indiana-based Steel Dynamics (SDI) to record profits in 2018. Nucor's shipments of steel bar goods increased 11.1pc to 8.9mn st in 2018 while shipments of steel sheet products increased by 1.7pc to 10.8mn st.
But both companies have said lower prices will bring down their first quarter results and wet winter weather hampered shipments. SDI expects overall shipments to increase in the first quarter compared to the fourth, while Nucor said margins in its sheet mill group will narrow in the first quarter compared to the fourth.
The tariff-driven increase in steel prices also contributed to some companies that consume steel such as GM's decisions to shed workers and close factories. Heavy equipment manufacturer Caterpillar said higher raw material prices ate into its 2018 profits. Trade conflicts with partners such as China, the EU and Canada have weighed on global and US economic outlooks and concerns of a global slowdown are on the rise.
Ohio-based AK Steel expects 2019 profits to range between $160mn and $180mn, which would be lower than the $186mn it earned in 2018. The company expects flat-rolled steel shipments to increase by 3.8pc to 5.9mn this year, but for flat-rolled prices to stay roughly the same as last year.
Thanks to the boost from the tariffs, US steelmakers are launching new plants or bringing idled plants back online.
Steel Dynamics is working to find a location for a new $1.8bn electric arc-furnace steel mill in the southwest, with Corpus Christi, Texas, emerging as a potential site.
US Steel has restarted the process of building its first electric arc-furnace mill, a 1.6mn st/year facility that will be built in Fairfield, Alabama, with a start date of 2020. The company restarted the blast furnaces at its Granite City Works integrated mill in Illinois.
But those same capacity could contribute to longer term price pressure once they come online in the next decade.
AK Steel chief executive Roger Newport warned that an increase in US production from new and restarted mills, coupled with continued global oversupply led by China, would lead to greater competition in the US.
China's systemic overcapacity, "along with recent US announcements of new steelmaking capacity and the restart of existing mills will create more competition," Newport said.
