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United States Metals Report Q2 2011
Business Monitor International, April 2011, Pages: 49
Business Monitor International's United States Metals Report provides industry professionals and strategists, corporate analysts, metals associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on United States's metals industry.
Steel and aluminium production is continuing its upward trend in line with strong manufacturing growth, but producers remain nervous about bringing capacity online at a time of uncertainty, high costs and global oversupply. The US produced 80.60mn tonnes of crude steel in 2010, up 38.5% year-on-year (y-o-y). As a result, the US’s share of world steel production improved to 5.7% from 4.7% in 2009, raising its global ranking from fifth to third. However, output was still 18% down on pre-recession levels. The fragility of the situation facing the steel industry is demonstrated in the output and shipment figures for the first two months of 2011. Crude output in January at 7.19mn tonnes was the second highest monthly rate since September 2008, while output in February was the second lowest in 12 months.
The most challenging market is residential and non-residential construction, which stagnated in 2009 and 2010. While a recovery is expected in construction steel products in 2011, it will be tenuous and uncertain. This will be disappointing for EAF mini-mills such as Nucor that produce long production using scrap feedstock, the cost of which rose 30% to US$360/tonne in Q410. In the long term, long steel will be influenced by the US$787bn American Recovery and Reinvestment Act (ARRA).
BMI forecasts crude and hot-rolled output growing 3.5% and 4.2% in 2011 to 83.42mn tonnes and 83.20mn tonnes respectively, while finished steel consumption should grow 3.2% to 93.72mn tonnes. However, BMI’s growth rate forecasts are more than double those in our previous quarterly report, due in large part to the strength of the manufacturing sector in H111, which performed better than expected.
Primary aluminium production was flat at 1.73mn tonnes in 2010. In the first two months of 2011, steel output was up 10.5% y-o-y to 13.8mn tonnes and aluminium output was up 7.0% y-o-y to over 291,000 tonnes. According to the Aluminium Association, demand for US and Canadian aluminium products, measured as shipments from domestic producers plus imports, rose 12.6% y-o-y in 2010, but growth was slowing towards the end of the year.
Aluminium should see stronger growth in 2011 as production resumes at Alcoa’s facilities and some minor producers. Combined primary and secondary aluminium production is forecast to rise 10.3% to 2.95mn tonnes. The leading producer in the US, Alcoa brought 137,000 tonnes per annum (tpa) of primary aluminium smelter capacity back online in Q111, but was still operating at just under 60% of capacity. It stated in March that the business environment was not strong enough for it to bring back more production capacity idled after the recession. In February 2011, independent producer Ormet Corp restored its 90,000tpa aluminium smelter to full capacity and was close to deciding to restart its newly acquired Burnside alumina refinery, dependent on the movement in the price of alumina. It is aiming to produce 80,000 tonnes of extra aluminium output in 2011. The independent aluminium smelter’s total production capacity is about 266,000tpa. Lingering troubles in the automotive industry have ensured it will be 2015 before combined annual aluminium output approaches the 4mn tonnes mark. Secondary aluminium smelting growth will outpace primary smelting.
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