Fundamental Report

**Flash Report – Domestic production not ramping up as significantly as capacity utilization initially suggested.**

US domestic capacity utilization fell for the second week in a row, down another 0.8% to 75.7%. This move comes after utilization briefly hit its highest level since August of last year.

Looking more closely at the data, the jump in utilization came from capacity going offline rather than a ramp up of production (chart 2, green).


Historically, we observe that domestic production ramps up after prices start to roll over – a signal that the party is over and that mills are going to attempt to pull out as much profitability as they can before prices fall.

While we do anticipate further downside pressure on steel prices in the near term, there are two ways to view the recent movement in these dynamics:

  1. Mills going to be more restrained this time around, attempting to match demand and cause a more orderly
  2. Inclement weather is the cause of this disruption, and it will normalize, and production will ramp in the coming weeks.

This data was released yesterday afternoon, and today’s HRC future curve reacted with front end buying.


AISI Capacity Utilization


AISI Raw Steel Production