Implications of Rising Flat Steel Imports for AK Steel

03 Apr 2017

Flat steel products consist of sheets and plates that are used in a wide range of industries. HRC (hot rolled coil), CRC (cold rolled coil), and HDG (hot dip galvanized) sheets are among the most widely used flat steel products. In 2016, the United States slapped strict anti-dumping duties on the imports of these products from countries including China and Korea.

We saw a steep fall in flat steel imports in the immediate aftermath of these duties as existing supply lines dried out for US importers. However, US steel buyers seem to have discovered alternate suppliers, especially in Vietnam.

According to preliminary data released by the United States Census Bureau, CRC imports totalled nearly 218,000 metric tons in January 2017, a YoY (year-over-year) rise of 41.8%. Galvanized steel imports witnessed a similar YoY rise in January. However, HRC imports fell 56.7% YoY to 143,000 metric tons.

The divergence in HRC and CRC imports could be explained in simple economic terms. Thanks to the near record HRC-CRC spread in the US market (DIA) (DJIA-INDEX), the price arbitrage between US and international CRC prices is juicy enough for buyers to explore international markets.

The same holds true for HDG steel products. However, there’s not much incentive for US buyers to look overseas for HRC products, as there’s not much of a price difference between US prices and the landed costs of imported HRC products.

Nonetheless, rising CRC and galvanized steel imports are negative for flat rolled steel producers such as AK Steel (AKS), ArcelorMittal (MT), Nucor (NUE), and U.S. Steel Corporation (X). In the next article, we’ll see how US steel prices have played out so far in 2017.

Source:marketrealist