U.S. raw steel production for the week ending May 23 notched up a 1.6% gain over the previous week, according to the American Iron and Steel Institute ("AISI") – an association of North American steel makers. Capacity utilization also rose on a weekly comparison basis.

As per data released by AISI, domestic raw steel output was 1,732,000 net tons for the reported week with a capability utilization rate of 73.3%. This compares favorably with production of 1,705,000 net tons and capability utilization rate of 72.1% for the week ending May 16. However, the reported weekly production fell 6.9% from the same period a year ago.

By region, production in the North East for the reported week was down 6.4% from the previous week to 236,000 net tons. Output from Great Lakes also clipped 2.4% to 628,000 net tons. Production from Midwest and Southern regions edged down 0.5% and 0.3%, respectively, to 209,000 and 573,000 net tons, respectively. The Western region produced 86,000 net tons of raw steel, flat on a weekly basis.

Adjusted year-to-date output through May 23 was 34,942,000 net tons at a capability utilization rate of 72.3%. This represents a 7.2% decline from 37,645,000 net tons during the same period a year ago. Capability utilization rate for the period also declined from 77% recorded last year.

According to AISI, production capacity for the second-quarter 2015 is roughly 30.7 million tons compared with 31.3 million tons a year ago and 30.4 million tons for the first quarter of 2015.

U.S. steel makers including U.S. Steel (X - Analyst Report), Nucor (NUE - Analyst Report), AK Steel (AKS - Analyst Report), Steel Dynamics (STLD - Snapshot Report) and Commercial Metals Co. (CMC - Snapshot Report) remain rattled by a flood of unfairly traded imports of steel products. Surging imports coupled with oversupply in the market is pressurizing steel prices as well as prospects of domestic steel producers.

The estimated market share for finished steel imports was as high as 34% of the market in the first quarter of 2015. Imports continue to make inroads in the domestic market due to foreign producers’ overcapacity. A recovering economy coupled with a stronger greenback has made the U.S. an attractive market for finished steel imports.

According to a recent report from the World Steel Association (“WSA”) – the international trade body for the iron and steel industry – crude steel production tumbled 9.8% to 6.5 million tons (Mt) in the U.S. in Apr 2015. Per WSA estimates, apparent steel use in the U.S. is expected to contract 0.4% year over year to 106.5 million tons in 2015. While demand is expected to rebound next year with a projected 0.7% gain, a stronger dollar may weigh on growth prospects.

While the steel market environment is expected to remain challenging in the U.S. in 2015, strength in the automotive market and a rebound in construction activity represent tailwinds for the country’s steel industry. The automotive sector should gain from lower fuel prices and an improving job market while the housing market is expected to continue its recovery momentum, which augurs well for steel usage in the country.