The U.S. Steel industry is beginning to stir interest as demand in the US has stabilized at a low level, and signs of sequential improvement are begining to emerge. On top of that, continued strong economic growth in China has lead to global steel production levels recovering faster to high levels.
Even Goldman Sachs is jumping on the steel-bangwagon, citing faster-than-previously-expected global market recovery, and a leaner supply chain in the US. The firm upgraded U.S. Steel (NYSE: X) from Neutral to Buy with a $52 price target. SteelDynamics (Nasdaq: STLD) remains their top pick. Goldman also predicts China will become a net importer of American steel in 2010.
Recovery in auto and appliance demand has already started to show up in increased prices, extended order books, and rising demand for flat steel.
According to Los Angele-based IBISWorld, an industry research firm, the US market for steel is much larger than domestic production and, as a result, imports have been substantial. The local market was valued at about $151.6 billion in 2008, with imports amounting to about $43.5 billion. Exports were considerably smaller, at an estimated $17.5 billion.
The automotive and construction industries will remain key sources of demand for steel producers. Also, the construction industry is being viewed by steelmakers as a major growth market for steel, with new initiatives designed to increase the use of steel-framed housing over the next few years.
With China expected to continue to account for over 50% of the growth in steel consumption, IBISWorld forecasts world steel consumption to increase at an annualized rate of 4.6% to 1840 million tons over the five years to 2014. Also fueling growth beyond the outlook period is India, whose consumption of steel is expected to rival China’s within the next 25 years.
Related Links: IBISWorld industry reports