US Steel Imports Down On Tariffs, Market Share Falls In May

Much to the respite of American steel makers, U.S. steel imports have dropped roughly 12% year to date – according to the latest report from the American Iron and Steel Institute (“AISI”), an association of North American steel makers. The decline reflects the impact of the 25% tariff on steel imports which the Trump administration had levied last year.

Per the AISI, total and finished domestic steel imports are down 11.7% and 18.1% year over year, respectively, year to date (through the first five months of 2019) to roughly 13.58 million net tons and 9.95 million net tons, respectively.

In May, total and finished steel imports dropped 38.2% and 9.3% from April to around 2.06 million net tons and 1.85 million net tons, respectively. These figures are based on final U.S. Census Bureau data, the AISI noted.

Finished steel import market share was estimated at 19% in May. That is down from 21% clocked in April. Finished steel import market share was estimated at 21% for the first five months of 2019. That is considerably lower than the levels seen in the recent years. Finished steel import market share shot up to as high as 29% in April 2018. However, the punitive trade actions have led to a decline in market share since then.

For 2019, annualized total and finished steel imports are expected to decline 3.3% and 7% year over year respectively, per the AISI.

The biggest offshore suppliers for the first five months were South Korea with 1,287,000 net tons (down 16% year over year), Japan with 611,000 net tons (down 0.2%), Germany with 517,000 net tons (down 6%), Taiwan with 436,000 net tons (down 7%) and Vietnam with 368,000 net tons (down 5%).

Tariffs – A Breather for U.S. Steel Mills

The steep tariffs on steel imports, that were imposed under Section 232 of the Trade Expansion Act of 1962, have provided a much-needed reprieve to American steel makers and instilled optimism in the long-struggling U.S. steel industry.

The tariffs have boosted production capacity of U.S. steel producers amid lower imports. They have helped U.S. steel industry capacity break above the important 80% level – the minimum rate required for sustained profitability of the industry.

According to the AISI, U.S. steel mills operated at 80.5% of their capacity for the week ending June 22. Capability utilization rate for the week increased from 77.4% a year ago.

Improved capacity is also boosting U.S. steel production. Per the World Steel Association ("WSA"), crude steel production increased 6.2% year over year to 37.2 million tons in the United States for the first five months of 2019.

U.S. steel companies forged solid earnings last year, thanks largely to the Trump administration’s trade actions. The tariffs provided a boost to U.S. steel prices last year, driving profits and cash flows of American steel makers including United States Steel Corp. (NYSE:X) , Nucor Corp. (NYSE:NUE) , Steel Dynamics, Inc. (NASDAQ:STLD) and AK Steel Holding Corp. (NYSE:AKS) .

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Nucor and AK Steel currently have a Zacks Rank #3 (Hold), while both Steel Dynamics and U.S. Steel carry a Zacks Rank #5 (Strong Sell).

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Written By: Zacks Investment Research