By Paul Ploumis

ScrapMonster Author

SEATTLE (Scrap Monster): According to survey conducted among top analysts, the US steel industry is most likely to return to growth in 2017. The projected growth is mainly on account of lower imports and rising domestic demand. Introduction of various trade protectionist measures will help to curb the rising cheap imports from other countries. The increased demand from housing and construction markets will result in increased steel production, the analysts observed.

The US steel makers have witnessed a tough year in 2016. Sharp drop in raw material prices, global oversupply and dumping of steel products from countries such as China have impacted the domestic steel sector in the country. As a result of this slowdown, American steel making majors including Nucor, AK Steel and US Steel reported weakness in earnings. However, analysts expect recovery in US steel demand, mainly on account of rising demand from construction, oil and gas sectors. Meantime, demand from automotive sector is expected to remain weak.

The crude steel output by the US is expected to increase by 4.4% in 2017, after two consecutive years of contraction. Incidentally, the US crude steel output during the initial eleven months of the current year has totaled 72.041 Million tons, marginally down by 1.2% when compared with the corresponding period last year. The annualized output for the entire year 2016 is estimated at 78.590 Million tons, down when compared with 2015 output total of 78.916 Million tonnes. The 2015 output had dropped significantly when compared with the output of 88,174 Million tonnes in 2014.

Many US steel majors have announced revival plans in anticipation of better market conditions. In February this year, ArcelorMittal had launched Action 2020 plan in order to deliver structural improvements to meet long-term profitability and cash flow targets. It targets to deliver cash flow in excess of $2 billion by 2020 by raising the Ebitda per tonne of steel produced to $85 and increasing the total steel shipments to 90 million tonnes by 2020. It must be noted that the company’s Ebitda per tonne was $62 in 2015. The steel shipments had totaled less than 85 million tonnes during the year.

Recently, the United States Steel Corporation (US Steel) has announced its decision to reopen the idled hot strip mill in Granite City, Illinois. The company press release states that the company will begin processing slabs at the Granite City Works mill during mid-February next year. The decision to restart the hot strip mill is expected to bring back nearly 220 jobs, out of which nearly 200 would be for unionized workers. The company press release further states that the blast furnaces and steelmaking facilities will continue to remain idled.

According to analysts, easing in metallurgical coal prices coupled with increase in steel prices will help steel companies to report higher profitability during 2017. The steel prices are expected to rise to a level where it would offer producers better margins starting from the second quarter of 2017. The second, third and fourth quarter of 2017 are expected to be better when compared with this year, they noted.

Meantime, steel production by the EU region is forecast to increase by 1.5% in 2017. More than 50% of the analysts predict negative output growth by China, thanks to various measures by Chinese administration to curb steel output by the country.