Pain has returned to the US steel industry, despite the tariffs put on imported steel last year that were designed to help.
Late Tuesday US Steel announced it will idle two of the blast furnaces where it makes steel, one in its flagship mill in Gary, Indiana, near Chicago, the other in Ecorse, Michigan, near Detroit. The idled furnaces will cut production by about 200,000 tons of steel or more a month, the company said.
“We will resume blast furnace production at one or both idled blast furnaces when market conditions improve,” said the company.
US Steel (X) also cut its earnings outlook and shut an additional blast furnace in Europe. Although some of the drop in profit is because of the slowdown in the European economy, it pointed to softening demand in the American market as well. US manufacturing has been slowing recently.
US Steel’s action follows similar warnings Monday from Nucor (NUE), the nation’s largest steelmaker, and Steel Dynamics (STLD). Both are now forecasting lower profits. Nucor (NUE) pointed to weaker demand from the US auto industry. Steel Dynamics (STLD) said steel prices have declined across its line of products.
The Trump administration placed a 25% tariff on steel imports in 2018. It helped temporarily lift prices as domestic steelmakers no longer had to worry about as much competition from low-priced steel from China and other locations.
Steel customers worried about how much the tariffs would hurt their supply, so they went on a buying binge early in 2018. That also drove up prices. As steel prices and profits rose in the industry, domestic mills brought capacity back up at previously idled mills.
But last year’s large rise in steel prices proved to be short-lived.
The supply problems never actually took place. Customers started working off their stockpiles, which cut into overall purchases. Slowdowns in the auto, energy and construction sector also hurt demand. That drop in demand, combined with the increased American production, caused a glut in supply and a sharp drop in prices so far this year.