How does Coronavirus impact the US steel industry?

How does Coronavirus impact the US steel industry?

The Coronavirus has affected the American steel industry. The US metal and mining industry felt the pain of the Coronavirus outbreak even before it would hit American companies.

 

Demand for steel decreased in the US

 

The US steel industry felt worries about the Coronavirus before the other US businesses. 

China is the world’s largest consumer, producer, and exporter of metals. Coronavirus, which originated in China, has affected the demand for steel in the United States. Major end-users, such as the automotive sector, cut production. There have also been reports of buyers canceling their orders. Last month, the US steel industry asked the Trump administration to consider it as an essential enterprise. Since demand has decreased, domestic factories have reduced production.

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US steel production falls

Steel production in the US dropped 12.7% year-over-year in the week ending March 28. The capacity utilization rate also declined to a multi-year low of 71.6%. Incidentally, the Commerce Department intended to increase the capacity utilization rate of the domestic industry with Section 232 tariffs. Undoubtedly, the taxes that President Trump imposed in March 2018 led to a sharp drop on US steel imports. After decreases in 2018 and 2019, imports have fallen sharply in the first two months of 2020. However, these are extraordinary times, and the fall in imports means little to the domestic industry.

 

X’s share price has fallen

HRC, hot-rolled coil futures have fallen. Currently, they are close to $ 450 per ton. Last time the prices at this level were seen during the 2015-2016 crisis in metal prices. Before that, HRC prices in the US tested $ 400 per ton during the 2008 global financial crisis. In particular, steel prices remained largely stable even as other industrial metals fell in early March. However, fears of coronaviruses have finally caught up with the industry.

 

NYSE: X, US Steel Corporation has been under pressure due to the Coronavirus, falling crude oil prices, and a weak balance sheet. Even before the beginning of price deterioration, the company announced the closure of plants. The company’s share price has fallen sharply this year. The stock declined in 2018 and 2019 as well. If the price environment does not improve, further capacity cuts in the domestic steel industry are expected.

 

US Steel Industry Outlook

The short-term outlook seems hopeless for the American steel industry. However, the Chinese sector attempts to operate at a regular pace. If regular trading conditions resume in China, it will help eliminate some of the accumulated steel inventories. The Chinese government could also increase its infrastructure investments in a bid to shore up the downturn economy. Several other countries could consider investments in infrastructure, as well as other fiscal measures to support their economies.

 

The metals and mining industry would also benefit from the fiscal and monetary relaxation that was necessary due to the Coronavirus. Lower interest rates support demand for homes and cars, the top two steel end-users. Accommodative budgetary and financial policies would help raise demand after fears of the Coronavirus subside. President Trump has also asked for a $ 2 trillion stimulus for the infrastructure sector. If implemented, the incentive would boost US demand for metals. 

 

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