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Strong US Dollars hurts Domestic Scrap Market

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(Bloomberg) -- The U.S. economic recovery is gaining steam and the dollar has surged. That’s bad news for the $100 billion domestic steel industry. Foreign competitors with weaker currencies pay less to produce the metal. That’s allowing them to undercut U.S. steelmakers in their own backyard as demand wanes in China, Russia and Brazil.

The result: the amount of imported steel used in the U.S. has swelled in the first two months of 2015 to 33 percent from 28 percent in 2014, according to the American Iron and Steel Institute. At the same time, idled production capacity at U.S. mills has grown to 31 percent, the highest since 2009.

“Imports have effectively taken all of the growth upside for the industry,” said Curt Woodworth, a New York-based analyst at Nomura Holdings Inc.

Steelmakers including Nucor Corp., the largest in the U.S, AK Steel Holding Corp. and Steel Dynamics Inc., have all warned that profit is going to take a hit this quarter, and executives are scheduled to be in Washington Thursday to urge lawmakers to trim allowable imports at a hearing of the Congressional Steel Caucus.

Nucor, based in Charlotte, North Carolina, said March 19 that its first-quarter profit will be as much as 71 percent lower than it previously forecast, a change it attributed to the “exceptionally high level” of imports flooding the domestic market. Excess production capacity built by foreign, state-owned companies is the biggest risk to its business, it said.

U.S. Steel Corp. said Wednesday it will idle a steel plant in Illinois, due in part to imports and “unfair trade.”

>Bloomberg.com
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