Steelmakers Expand Production Capacity

Steelmakers in the U.S. are expanding steel production capacity, betting that recent falling prices won’t last and tariffs will shield them from foreign competition.

A build-out by Nucor Corp., Steel Dynamics Inc., and a half-dozen other companies would add 16 million tons of steelmaking capacity in the U.S., an 18 percent increase over the 90 million tons produced here in 2017, before tariffs took effect.

Steel demand has been weakening lately, increasing the risk that putting more steel into the market could cause a glut and drive prices lower. The price of hot-rolled sheet steel used widely throughout manufacturing is down 25 percent from a 10-year high of $920 a ton in July.

“It does not bode well for higher prices in 2019,” said Jim Barnett, chief executive of Grand Steel Products Inc., a steel distributor in Wixom, Mich.

United States Steel Corp., one of the largest U.S. steel producers, restarted two blast furnaces near St. Louis last year capable of producing 2.8 million tons of steel annually. The furnaces were idled in 2015 because of low prices for steel.

Other steel companies expanding their production say they won’t be dissuaded by additional steel from existing mills. They are counting on new steelmaking plants costing less to operate than older mills, allowing the new mills to remain profitable at lower prices that could idle existing mills.

Source: Wall Street Journal