Based on reported import licenses, US flat products imports declined 23% from 350,000 short tons in May to 270,000 tons in June. This compares to flat products imports of 816,000 tons in September 2008 when we started collecting flat products license data.
Hot dip galvanized imports showed the largest decline at 28% falling to 63,000 tons. Cut plate imports fell by 23% to 21,000 tons, hot roll imports dropped by 22% to 136,000 tons, and cold roll imports declined 20% to 49,000 tons.
Licenses reported up to 14 July indicate that full month July results will be even lower than June’s.
The World Steel Association’s crude steel production report published today shows a 4% rise for June over May. Global production is running 21% lower year to date versus 2008, but that varies significantly by region. The developed world is down 45%. The non-China developing world is down 23%. China, by contrast, is up 2%. China was over 50% of crude steel production in June and accounted for about 75% of the growth over May. You can make your own calculations from the data, shown in the Nerds of Steel spreadsheet below:
Based on reported import licenses, US long products imports rose 9% from 98,000 short tons in May to 108,000 tons in June. To put this in perspective, long products imports in June 2008 were 269,000 tons and in June 2007, 496,000 tons.
There were some significant changes within the product categories. Rebar imports dropped 59% to 18,000 tons, wire rod imports rose 67% to 43,000 tons, parallel flange sections imports rose 175% to 15,000 tons, and all other structural sections imports rose 161% to 15,000 tons.
Licenses reported up to 14 July indicate that long products imports will remain at June levels for the full month of July.
Lots of people are watching the AISI’s weekly utilization data very closely, including us. I referred in a recent post how anemic the improvements in capacity utilization have been and the improvement is indeed slow. But we passed a kind of milestone last week. According to the AISI, the US steel industry got above 50% crude steel capacity utilization for the first time since the end of November last year. To put this in some sort of context, here are two charts.
The first chart shows (in the red line) the weekly crude steel utilization rates since August of last year. The yellow line shows a twelve-week rolling average. Steep decline, slow recovery. We’ve seen this before.
The second chart is a little more interesting. It shows the rate of change in crude steel output in week 12 versus output in week 1 in rolling twelve-week spans starting in October of last year through to July of 2009. The chart shows that since the beginning of 2009 there has been a steady slowing of decline in output until we reached the “doldrums” of March and April. Since then, production has moved steadily up in each twelve-week span until the last period in which production is up about 24%.
As I’ve written before, this does not a recovery make and there’s no knowing where the data will go. But if there’s going to be a recovery at all we have to see persistent improvement. Be glad that the patient is, for the moment, showing a pulse.
However it might look, China doesn’t care about iron ore. China cares about iron ore’s impact on the steel industry and steel’s impact on Chinese economic growth. The concern is understandable, but the latest move is misguided and will likely backfire. The charges are clumsy and extreme and because they’re international in scope they are dangerous. Besides such strong arm tactics don’t work as other governments have found out.
In April 1952, Harry Truman siezed control of the American steel industry because he thought a strike would hobble the Korean war effort. He was overruled by the Supreme Court a month later and had to give the industry back.
The Kennedy administration had a fractious relationship with the steel industry as this remarkable presidential press conference about rising steel prices illustrates:
There are many other examples around the world of the steel industry and governments getting in each other’s way. Governments will always be frustrated when trying to bully any industry into submission. In the end the economics of the industry will assert themselves no matter what government does. One of the major reasons for the great improvement in steel industry performance in the recent past has been the general retreat by governments (outside China) from ownership of steel industry assets.
If Chinese officials want to improve the prospects of their steel industry they shouldn’t be locking up iron ore executives on trumped up ‘espionage’ charges. The raw material input price will be what it will be and any forced benefit will be only temporary (as LBJ found out). A much better idea is to privatize all steel industry assets in China and, in doing so, let foreign producers own some of them. There is no faster way to improve the performance of the steel industry, unify it on a global basis and support the growth of the Chinese economy and global trade.
And a note to Western steel industry lobbyists. This is a much more important issue than either currency or trade.
The German Steel Federation (VDEh) is one of the best sources of information about its national steel industry (and lots of others too) anywhere in the world. Take for instance, this excellent recent profile of the German Steel Industry (in PDF) by Herr Dr-Ing Carl-Dieter Wuppermann. If you send them to us, we’ll be happy to feature other profiles of national steel industries or major companies so long as they’re as good as this one.
