Economic indicators as well recent trends are supporting a positive outlook for the US steel sector in 2018. Sources report that positive sentiments for 2018 are supported by an expectation of continued Chinese environmental policies, slightly tapered steel imports, strong domestic auto sales, and strong domestic construction sector.
In the US, the construction sector, which includes both residential and nonresidential construction, is the largest steel end consumer followed by the automotive sector.
US November housing data were better than expected as US housing starts rose 3.3 percent to a SAAR (seasonally adjusted annual rate) of 1.297 million units. Furthermore, single-family housing starts rose to a 10-year high. While building permits fell 1.4 percent to a SAAR of 1.298 million units in November, it is anticipated to improve after the winter season. New home sales also rose to a ten-year high last month. Overall, November’s housing data was better than expected.
The Architectural Billing Index (ABI) which leads actual construction spending by about nine to 12 months was at 55.0 for November, the strongest reading for the year. A value of above 50 indicates an increase in billing, and higher architectural billing generally translates into increased future construction spending.
In November, US auto sales totaled 1.4 million vehicle units, according to data compiled by Autodata. That number was 1.3% higher than sales of 1.38 million vehicle units in November 2016 and higher than 1.35 million vehicle units in October 2017. Car sales are down only slightly as compared to 2016 and exceeded expectations for the year. A growing economy along with strong consumer confidence is expected to support strong automotive sales in 2018.
On the steel imports front, US steel imports were on the rise this year. Until October, US steel imports had risen on a yearly basis for 12 consecutive months. November preliminary steel imports data released by the US Census Bureau showed a shift in imports. The United States imported 2.46 million metric tons of steel products in November. The amount decreased on a month-on-month and year-on-year basis. The US imported 2.85 million metric tons in October and 2.54 million metric tons in November 2016. OCTG, HRC and CRC encountered a decline on imports in November. Lower steel imports along with strong global prices could support US steel prices in 2018.
Finally, due to strong 2017 fourth quarter results that hinged on strong global dynamics and less on US protectionism, many players in the industry see less of a need to adopt Section 232 measures which could end up disrupting other aspects of the economy and negatively affect trade relations with important global partners.