Steel Industry Executive Summary: August 2012

Highlights U.S. imports of steel mill products decreased 8% to 2.6 million metric tons in June 2012. From May to June 2012, the steel trade deficit narrowed 8.5% to -1.5 million metric tons. U.S. steel production decreased by 4.8% to 7.3 million metric tons in June 2012.

Table of Contents
Trade - Imports of Steel Mill Products.........................................................................................2 Trade - China ..............................................................................................................................2 Trade - United States Trade Balance in Steel ...............................................................................6 Trade - Steel Import Changes by Country and Product ................................................................7 Demand ....................................................................................................................................10 Trade Remedy Case Determinations July/August 2012...........................................................12 Industry Status ..........................................................................................................................12 SIMA Team Contact Information ..............................................................................................14

List of Figures
Figure 1 - US Imports of All Steel Mill Products from World ......................................................2 Figure 2 - US Imports of All Steel Mill Products from China ......................................................3 Figure 3 - China's Imports/Exports of Steel Mill Products ...........................................................4 Figure 4 - Chinese Exports of Steel Mill Products by Partner in June 2011 ..................................5 Figure 5 - Chinese Exports of Steel Mill Products by Partner in June 2012 ..................................5 Figure 8 - U.S. Trade of All Steel Mill Products - Monthly .........................................................6 Figure 9 - U.S. Domestic Steel Capacity Utilization ....................................................................8 Figure 10 - Monthly World Crude Steel Production.....................................................................9 Figure 11 - Monthly Crude Steel Production - Major Producers ..................................................9 Figure 12 - Share of World Crude Steel Production ...................................................................10 Figure 13 - U.S. Apparent Consumption of Steel Mill Products .................................................11 Figure 14 - Import Penetration for All Steel Mill Products.........................................................11 Figure 15 - U.S. Steel Industry, Quarterly Net Income ..............................................................13 Figure 16 - Steel Stocks vs. S&P 500, 1 Year Activity ..............................................................14

U.S. Department of Commerce | International Trade Administration 1

Trade - Imports of Steel Mill Products U.S. imports of steel mill products decreased 8% to 2.6 million metric tons from May to June 2012, according to final Census figures. o U.S. steel imports in June 2012 are 4.2% above the volume in June 2011. o June 2012 steel imports are 18.7% above the 2011 average monthly volume of 2.2 million metric tons.

Figure 1 - US Imports of All Steel Mill Products from World

Trade - China U.S. imports of steel mill products from China followed a steep upward trend in mid 2011 and leveled off in late 2011. However, imports from China appear to be on a steep rise in 2012. Imports are 301.3% above the most recent low in February 2011. o From May to June 2012, imports from China increased 13.8% to 178.6 thousand metric tons, according to final Census data. o June 2012 imports from China are 21.6% above the volume in June 2011 and 90.6% above the 2011 average. o U.S. imports from China represent a total of 7% of all U.S. steel imports, up from the share in March 2012 and the share one year ago.

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Figure 2 - US Imports of All Steel Mill Products from China

According to the latest available data from the three NAFTA countries, imports from China into NAFTA countries increased 17.3% in volume from March 2012 to April 2012. April steel imports from China into NAFTA countries increased 72.6% in volume from April 2011. Total steel imports into NAFTA countries from the world (excluding intra-NAFTA trade) rose 1.6% to 2.9 million metric tons from March 2012 and 27.1% from April 2011. Imports from China represented 4.7% of all NAFTA country steel imports in April 2012, above the 3.8% share in March 2012 and the 3.2% share in April 2011.

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Chinese steel mill exports slightly increased while imports decreased from May 2012 to June 2012, expanding Chinas steel trade surplus 7% to 3.9 million metric tons. o From May to June 2012, Chinese exports increased 1% to 5 million metric tons, 8.8% below the most recent export peak in June 2010. o Chinese steel exports are 22.5% above June 2011 exports. o June 2012 steel mill exports are 43.1% above the volume of December 2011 exports and 282.9% above June 2009 exports. o Chinese imports fell 15.3% to 1.1 million metric tons from May to June 2012. Chinas steel imports for June 2012 are 7.7% below the volume of December 2011 imports, 7.3% below imports a year ago, and 43.3% below imports in June 2009.

Figure 3 - China's Imports/Exports of Steel Mill Products

Chinese steel mill exports increased 22.5% by volume from June 2011 to 2012. o The United States received the 8th largest share of Chinese steel exports at 3% in June 2012. o The volume of Chinese steel exports to the United States increased 0.5% to 150 thousand metric tons from June 2011 to June 2012. o From June 2011 to 2012, Chinas volume of steel mill exports to South Korea decreased 4.6%.

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Figure 4 - Chinese Exports of Steel Mill Products by Partner in June 2011

Figure 5 - Chinese Exports of Steel Mill Products by Partner in June 2012

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Trade - United States Trade Balance in Steel U.S. imports of steel mill products have fluctuated in the past few years, while exports have slowly but steadily increased. In June 2012, the steel trade deficit narrowed to -1.5 million metric tons, 8.5% less than the deficit in May 2012. o Compared to the trade balance one year ago, the June 2012 steel trade deficit widened slightly at 2.4%. o From May to June 2012, the volume of exports decreased 7.2%, and the volume of imports decreased 8%. o June 2012 exports are 6.9% greater in volume than June 2011 exports; June 2012 imports are 4.2% above the level a year ago. Exports and imports fell in June from three-year highs in May 2012 and April 2012, respectively.

Figure 6 - U.S. Trade of All Steel Mill Products - Monthly

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Trade - Steel Import Changes by Country and Product Notable Increases

Average Average monthly monthly quantity quantity May 2012 - Aug 2011 Jul 2012 Apr 2012 (metric (metric tons) tons) 5,669 8,829 11,511 25,439 12,453 8,577 6,357 30,514 11,255 10,694 12,860 8,596 28,283 113,238 134,257 238,667 164,048 876 1,884 3,553 8,834 4,557 3,434 2,568 14,017 5,508 6,727 8,705 5,871 20,117 82,094 99,347 176,722 122,967 Percent change from Historic to Current average quantity 547% 368% 224% 187% 173% 149% 147% 117% 104% 58% 47% 46% 40% 37% 35% 35% 33%

Country TURKEY ITALY WORLD CHINA THAILAND ITALY CHINA CANADA BRAZIL WORLD WORLD WORLD WORLD WORLD WORLD WORLD WORLD

Product Structural Pipe & Tube -- C & A Sheets Hot Rolled -- S Sheets Hot Rolled -- S Bars-Hot rolled -- C & A Standard Pipe -- C & A Sheets & Strip Galv Hot Dipped -- C & A Wire Rods -- C & A Line Pipe -- C & A Plates Cut Lengths -- C & A Plates Cut Lengths -- S Blooms, Billets and Slabs -- S Strip-Hot Rolled -- C & A Sheets Cold Rolled -- S All Stainless Products Bars-Hot rolled -- C & A Line Pipe -- C & A Sheets & Strip Galv Hot Dipped -- C & A

SOURCE: US Department of Commerce, Import Administration, SIMA Table last modified August 14, 2012, with Licensing data collected through July 2012 and Final Census data compiled through June 2012. A notable change is defined here by a significant decrease in the current three month average quantity over the previous nine months average quantity; the program examines the largest importers within each product group. Steel mill categories are defined by 10-digit HTS codes.

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Production U.S. domestic capacity utilization has maintained steady gains over a historic dip. o In June 2012, the capacity utilization rate was estimated at 74.8%. o Though the capacity utilization rate has since increased 83.3% from the eight year low in April 2009, it still remains under the historical averages. The June 2012 rate was slightly lower than the rate in June 2011. According to data from the World Steel Association, U.S. steel production decreased by 4.8% to 7.3 million metric tons in June 2012 from 7.7 million metric tons in May 2012. This marks a 0.8% increase from the June 2011 production level.

Figure 7 - U.S. Domestic Steel Capacity Utilization

Global steel production decreased 2% to 127.9 million metric tons in June 2012 from 130.6 million metric tons in May 2012. o Global production has decreased by 0.1% from one year ago. o Chinas June 2012 production level decreased by 1.7% to 60.2 million metric tons from 61.2 million metric tons in May 2012. o The European Union 27 remains the second largest producer behind China with a June 2012 production level of 14.7 million metric tons, a 3.7% decrease from May 2012.

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Figure 8 - Monthly World Crude Steel Production

Figure 9 - Monthly Crude Steel Production - Major Producers

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Chinas share of total world steel production remained steady at 47% between May and June 2012, accounting for nearly half of monthly total world production, while the U.S. ranked fourth at 6%. Chinas share is larger than the combined production of the U.S., the EU 27, Russia, and Japan, which historically were the largest producers of steel.

Figure 10 - Share of World Crude Steel Production

Demand Apparent consumption (used to measure domestic demand) for steel, excluding semi-finished products, decreased 5.6% to 8.2 million metric tons in June 2012 from 8.7 million metric tons in May 2012. o June 2012 demand has increased 4.15% from one year ago. o Demand in June 2012 was 99% higher than April 2009, when steel demand was at its lowest level in recent years.

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Figure 11 - U.S. Apparent Consumption of Steel Mill Products

Import penetration for steel mill products, excluding semi-finished products, decreased to 24.4% in June 2012 from 25.2% in May 2012. Import penetration remains well below its high point of 35.6% in January 2009.

Figure 12 - Import Penetration for All Steel Mill Products

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Trade Remedy Case Determinations July/August 2012 Informal tracking of anti-dumping and countervailing duty case initiations, investigations, and orders applicable to steel products. Trade Remedies undertaken by the U.S. Product Steel Wire Garment Hangers Drawn Stainless Steel Sinks Country Taiwan and Vietnam China Department of Commerce Finding Affirmative Preliminary Antidumping Duty Determinations Affirmative Preliminary Countervailing Duty Determination

SOURCE: US Department of Commerce, Import Administration. news.html.

Factsheets available at http://ia.ita.doc.gov/ia-highlights-and-

Industry Status The U.S. steel industry, as represented in the chart below, posted a net loss of $385 million in the 2nd Quarter of 2012. o According to publicly available figures, five companies reported quarterly net incomes, while AK Steel ended the quarter with net losses. o Of the six companies monitored, Nucor reported the highest quarterly net profit at $112.3 million with US Steel close behind at $101 million net income. AK Steel reported a net loss of $724.2 million. o Since Q1 2009, the group of steel companies monitored in the below chart has collectively reported net income for only five out of thirteen quarters. o The net income chart includes AK Steel, Carpenter Technology, Commercial Metals Company, Nucor, Steel Dynamics, and US Steel.

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Figure 13 - U.S. Steel Industry, Quarterly Net Income

Most charted steel stocks closed July 2012 well below 2012 opening prices but near the months opening prices. o Indexed to January 3, 2011, many steel stocks rebounded in early 2012 since the low point in October 2011, but most reversed these gains in recent months. Some steel stocks rebounded slightly in July. Charted steel stock performance still remains below the S&P 500 trend line. o The steel stocks charts include the S&P 500, US Steel, Nucor, Steel Dynamics, AK Steel, and Mittal.

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Figure 14 - Steel Stocks vs. S&P 500, 1 Year Activity

SIMA Team Contact Information

Import Administration Office of Policy 14th & Constitution Ave., NW, Suite 2837
P P

Washington, DC 20230 Phone: (202) 482-2105 Fax: (202) 501-1377 Steel.License@trade.gov http://ia.ita.doc.gov/steel/license/index.html

ished 8/16/2012

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