Bipolar and Major Depressive Disorders
The steel industry is the backbone of most US manufacturing industries in essential functions such as transportation of food, water, and energy generation. The national security is also dependent on the steel industry as most security equipment is made of steel, for example, tanks’ armor plates, missiles, and submarines. However, the steel industry is facing a lot of challenges such as low demand and cheap imports, low prices and utilization rates, falling revenues, and procurement effect (procurement is cautious, and customer inventory is minimal. Both producers and consumers are facing challenges differently, but the price is a common factor affecting both (Mehta, 2019). While producers need prices to go high for a more significant profit margin, but the consumers are demanding low prices for affordability.
Imports, especially from China, have flooded the US steel market affecting the steel industry. In 2015, for example, a third of the steel sold in the US was from China. The Chinese steel industry produced an excess of 540% of steel; hence, doing its best to sell created steel. Half of the world’s steel is from China and thus is sold at lower prices compared to locally produced steel. The government of China, in fact, targeted to have cut up to 150 million tons of steel from its overcapacity (Popescu, Nica, Ștefănescu-Mihăilă & Lăzăroiu, 2016). The government needs to cut down the volume by another 400 million tons if it is to heal the damage caused by the other industrial policy that led to overproduction. Other countries, such as Turkey and Korea, have invaded the US steel market, making it hard for the US steel industry. Also, contrary to the anticipation of many that demand will go high after the great recession, the demand for supply is still low. This has led to low prices of Steel.
The utilization rate has remained relatively low, affecting the prices of steel. According to the US steel industry, utilization rate should be maintained at 80-85% to support steel prices. However, in almost four years, the utilization rate has reached 80% only once. With such a low rate, the still mills cannot increase steel prices. Despite about ten price hike announcements in a bid to rescue the falling prices, the prices have remained low (Mehta, 2019). None of the announcements has born fruits, has operating rate has remained at 75% on average terms.
Industry revenues in the steel sector have been in constant pressure. The primary cause of falling revenues is non-improving demand and relatively low prices. For example, the margin between the cost of production and HRC price stands at 10 to 20 US dollars for each ton for the BOF process. Since steel prices have failed to recover, the profit margins have also remained relatively down, and the industry cannot hike rates has the demand has also remained low. The government has trained to increase the price variance between domestic and import prices, but it is likely to lead to the industry becoming less attractive. The difference will put the US steel producers at a fix in increasing steel prices, given that they lack an export market. It is, therefore, tough to improve the state of the steel industry.
The procurement of steel has also been affected in the US. Following the suspension of the debt ceiling in the US in 2013, consumers have become paranoid. Therefore, consumers are very cautious in buying large amounts of steel. Still, consumers fear that the government might adopt harmful strategies for reducing the national debt. However, there might be hope as the government might find a way of making hikes materialize (Mehta, 2017). But if the hikes bear no fruits, consumers will stick to their purchasing behavior of hand to mouth.
In conclusion, the US steel industry is facing a lot of challenges that need to be addressed. There is a need to cure steel prices and also increase revenue. Sets of rules also need to be carefully enacted to regulate steel imports in the country.
Reference
Mehta, M. (2019). US steel industry on a growth trajectory. Steel Times International, 43(3), 31-32.
Popescu, G. H., Nica, E., Ștefănescu-Mihăilă, R. O., & Lăzăroiu, G. (2016). The United States (US) Steel import crisis and the global production overcapacity till 2016. Metalurgija, 55(3), 538-540.
Mehta, M. (2017). The uncertainties of the US steel industry. Steel Times International, 41(5), 12-13.