The industrial production index recorded a score of 95.9 for the second straight month in January 2012, according to estimates from the Federal Reserve. Among major industry groups tracked as part of the industrial production index, the manufacturing index climbed 0.7% month-over-month, from 92.8 to 93.5. However, the mining index declined 1.8%, from 112 to 110, while the utilities index dropped 2.5%, from 98 to 95.6.

Major Market Groups Show Mixed Results

Major market groups tracked as part of the larger index displayed varying performance, with final products, business equipment, and nonindustrial supplies all reporting small month-over-month gains, while consumer goods, construction, and materials all reported minor declines. The final product index climbed 0.4%, from 97.2 to 97.7, while the business equipment index rose 1.8%, from 102.5 to 104.4, and the nonindustrial supplies index increased 0.2%, from 85.5 to 85.7.

In contrast, the consumer goods index fell 0.1%, from 94.3 to 94.2, while 0.4% declines were reported by both the construction index (79.2 to 78.9) and the materials index (98.2 to 97.8).

Industry Capacity Utilization Falls Slightly

Total industry capacity utilization fell slightly, from an index score of 78.6 in December to a score of 78.5 in January. However, manufacturing capacity increased 0.6%, from 76.5 to 77. This was offset by a 2% decline in mining capacity (93.5 to 91.5) and a 3% decline in utilities capacity (76.7 to 74.6).

Looking at stage-of-process group performance, the crude index dropped 1% (90.9 to 89.9) and the primary and semi-finished index dropped by 0.5% (75.3 to 74.9), but the finished index rose 1% (77.3 to 78.1).

Weekly domestic raw steel production increased 1.2% to 1.929 million tons (mt) for the week ending February 11, 2012, and was up 6.6% from the year-ago level. The highest production on record dating back to 2004 was 2.215 mt on May 13, 2006; the lowest was 0.8 mt on December 27, 2008.

Capacity utilization rose from 77.2% last week to 78.1% this week, which surpasses last year’s rate of 74.8%. However, this was significantly below the 94.7% rate recorded on January 15, 2005. Capacity utilization hit a low of 33.5% on December 27, 2008.

Source: AISI and Steel Market Intelligence

Seasonally adjusted advance estimates of US retail and foodservice sales in January 2012 totaled $404.1 billion, according to the US Census Bureau. This represents a 5.6% increase from $379.3 billion in January 2011 and more modest 0.4% increase from $399.9 million in December 2011.

Excluding motor vehicles and parts, total January 2012 retail and foodservice sales equaled $329.7 million, up 5.5% from $312.5 million in January 2011 and 0.7% from $327.4 million in December 2011. On their own, retail sales amounted to $358.8 million last month, up 5.5% from $339.9 million the prior year and up 0.3% from $357.5 million the prior month.

Strong Building Material Sales Growth Good for Steel Market With an 8.1% jump in sales from a year ago, building material and garden equipment and supplies dealers had the second-highest rate of year-over-year sales increase among the 13 retail categories tracked by the Census Bureau, reporting sales of $26 billion, a 0.2% increase from slightly less than $26 billion in December 2011.

Food services and drinking places edged out building material dealers with an 8.2% year-over-year sales increase, rising from $39.4 billion to $42.6 billion. Month-over-month, a much smaller 0.6% increase from $42.3 billion was recorded.

At the other end of the spectrum, electronics and appliance stores saw their monthly sales drop 0.6% year-over-year, from almost $8.3 billion to $8.2 billion. However, compared to December 2011, sales in the category rose 0.5% from slightly less than $8.2 billion. No other category reported a year-over-year decline in sales.

Source: US Census Bureau

The number of active oil and natural gas rigs in the United States dropped 0.4% to 1,989 for the week ending February 10, 2012, but was still up 15.6% compared to last year.

The highest weekly rig count in the United States since 1940 was recorded on December 28, 1981, at 4,530; the lowest was recorded on April 23, 1999, at 488.

The number of rigs in Canada this week decreased 0.2% from 710 last week to 709, but was 12.5% higher than year-ago levels.

The highest rig count for Canada was 727 on February 3, 2006; the lowest was 29, recorded on April 24, 1992.

Source: Baker Hughes Inc.

For the full report and our thoughts on this surprising pricing move, please contact us at info@steelmarketintelligence.com.

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According to trade press, domestic long product producers (including industry leader Nucor) are reversing January steel price moves effective immediately, as scrap price gains of $30/ton reversed themselves. Steel prices for beams and merchants are being reduced by the full $30/ton decline in the steel scrap surcharge (or 3-4%), while a $15/ton base steel price increase for rebar, will partially offset the surcharge drop, resulting in a smaller, net transaction steel price drop of $15/ton (or 2%).

China’s vice president, Xi Jinping, arrives in the U.S. today to visit politicians, leaders, and businessmen, and build relationships between China and the U.S.

Because China is more than half of the world’s steel production, there is very little that matters more to the domestic steel market than Chinese steel policy. Xi Jinping hopes to build his reputation as a “world statesman,” according to the Wall Street Journal’s “Asia Today” program.  For more details, watch the full video.

For our views on current Chinese steel market, please contact us at info@steelmarketintelligence.com to get a trial subscription!

Act Now – Urge your Representative to Vote Yes on H.R. 7, the American Energy & Infrastructure Jobs Act, which is legislation that will support American job creation and economic growth by fully utilizing our domestic energy resources and utilizing the revenues to invest in transportation infrastructure.