US steel businesses struggle as Covid-19 cases rise

27th July 2020

Many US steel businesses are struggling to survive in the current climate. Weak demand and low prices are damaging resale margins and the financial health of the steel market. A number of companies will, inevitably, close permanently, as a result of the fallout from the coronavirus pandemic.

Intermittent shutdowns of businesses, where Covid-19 outbreaks have developed, are adding to the strain and causing havoc in steel demand planning. US manufacturing firms, particularly small enterprises, are struggling and will continue to find the trading environment challenging in the months ahead.

It is not just buyers that are affected by the current crisis. US steel producers using the blast furnace process are also finding it difficult to make a profit, at present. Mill capacity utilisation rates are slowly increasing, since hitting the bottom in early May. However, they remain thirty percent below the figures recorded at this time last year.

Raw material costs, particularly those for iron ore, remain high. Mini-mills are faring slightly better than the integrated producers due to their increased flexibility. Steelmakers are keen to restart their blast furnaces to improve plant activity and, subsequently, their balance sheets. However, if production grows too quickly, it could inhibit any prospect of price recovery and further damage profitability.

Mills table price hikes

Rises in steel selling figures would be welcomed by many companies across the industry. However, these can only be achieved if they are able to be passed down through the supply chain. The recent price hikes, in May of this year, faltered before they had been fully accepted in the market.

A further attempt to increase basis values is now underway. Buyers are sceptical that the proposed price rises will be successful before the end of the summer period.

The ongoing Covid-19 crisis and the upcoming elections in November are likely to restrict the recovery in the steel sector, in the second half of 2020. Forecasts for when the US economy will be back to pre-pandemic levels range from one to five years, depending on how long the virus outbreak lasts. For many businesses, this will be too late.

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