US steel companies’ performance remains robust – Fitch Ratings

The country's steelmakers continue to invest in expanding production

The fundamentals of US steel companies remain robust, according to Fitch Ratings’ outlook for 2024.

Industry consolidation has led to supply discipline. Fitch believes that strategic investments aimed at strengthening operating profiles will lead to improved margins throughout the cycle.

US steelmakers continue to make investments aimed at expanding higher value-added production and growth through new plant construction.

Fitch expects North American steel demand to grow moderately in 2024. New supply coming on the market will meet additional demand growth and continue to displace imports.

The rating agency sees a number of laws passed in the United States, in particular the Inflation Reduction Act (IRA), as a favorable factor for non-residential construction spending and steel demand in the next few years. In addition, analysts expect the United States to continue to see a recovery in auto sales due to pent-up demand as supply chain bottlenecks are removed.

The companies’ financial profiles are well-positioned to weather a potential U.S. economic downturn and a softer steel price environment after the historically high price period of 2021-2022, the report said.

Interest rates, inflation, supply chain issues and a stronger dollar remain obstacles to the industry. Fitch believes that hot-rolled coil prices in the United States will be lower next year than in 2023, but will remain above historical averages and at a relatively healthy level for domestic producers.

As GMK Center reported earlier, Wood Mackenzie, an international consulting company, forecasts that US steel demand will remain stable over the next few years. These expectations are largely attributed to robust domestic construction demand as the country continues to invest in infrastructure projects under the Inflation Reduction Act and the Bipartisan Infrastructure Act of 2022.