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The U.S. Dollar Is Stronger Than Steel

by Matthew Philips and Cristina Lindblad, Bloomberg, Sept. 3, 2015

When John Pierpont Morgan bought Andrew Carnegie’s steel business and combined it with two competitors to create U.S. Steel in 1901, the result was the world’s first billion-dollar corporation. Its roughly $1.4 billion market value would translate into about $33 billion in current dollars. But the company is worth less than a tenth of that today, at just under $2.5 billion.

While the steel industry has been fading in the U.S. for decades, things have gotten worse recently. A strong U.S. dollar, combined with a slowing Chinese economy, is bringing unprecedented amounts of cheap, foreign steel to the U.S., swamping domestic producers. Average monthly imports spiked by almost 1 million metric tons in 2014, a 38 percent increase from 2013. Through June of this year, steel imports averaged 3.3 million metric tons a month, roughly the same as last year. A lot of that is coming from China, the world’s largest producer. Although its economy has cooled, leading to the first dip in steel demand there in a generation, China’s mills have kept chugging along. Much of the excess output is being shipped overseas. In the first half of this year, China’s steel exports rose 28 percent compared with the same period in 2014.

The recent devaluation of the yuan could make Chinese steel even more attractive to U.S. buyers. Exports from Brazil and Russia have also jumped as the real and ruble have fallen sharply against the greenback.

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