The US steel and aluminium industries are facing the most testing times since the Great Depression, with BMI forecasting a sustained downturn in output that raises the distinct possibility of permanent plant closures, according to BMI's United States Metals Report. The US has five indigenous steelmakers in the top 100 global producers, with the United States Steel Corporation easily the largest. In 2008, US Steel boosted output, in large part due to its acquisition of Canada's Stelco in the previous year. US Steel's global production totalled 23.22mn tonnes in 2008, up 13% year-on-year (y-o-y). Nucor Corporation remained the largest domestic steel producer. It produced 18.2mn tonnes, down 9.2% y-o-y. Its production levels were brought down dramatically in H208, with utilisation rates plunging below 50% by Q4. Its problems continued into Q109 when it reduced its operating rates to around 43%. AK Steel's output rose by just 0.7% y-o-y to 5.92mn tonnes, Steel Dynamics was down 12.5% to 4.34mn tonnes and Commercial Metals Company was down 0.7% y-o-y to 2.70mn tonnes. Since the beginning of 2009, crude steel output has fluctuated and the market appears extremely volatile, with weekly output fluctuating between 860,000-1.1mn tonnes. Capacity utilisation rates were between 36-45%. According to the United Steelworkers union, in Q109 only nine blast furnaces out of a total of 29 were operating in the US.

The outlook is gloomy with steel buyers continuing to destock and, according to surveys in March, none intending to begin purchasing for at least six months. Steel output is set to plummet by over 40% to 54.32mn tonnes in 2009, but restocking is unlikely to occur until 2010 with the domestic steel market beginning its serious recovery in 2011. In terms of intensive steel users, BMI does not believe non-residential construction will return to 2008 levels over the forecast period and fabricated metals and industrial and electrical machinery production are not expected to recover until 2013 at the earliest. We do not expect the US automotive industry to reach its recent peak over the medium-term, with the SUV sector unlikely to ever recover. Given the sustained downturn in overall industrial output and a slow recovery, we believe the US metals market will remain depressed for the next three years. Higher utilisation rates and a reduction in idled capacity is not expected until 2013, leading to under-investment in raw materials, particularly iron mining. By 2013, output should reach 90.45mn tonnes, which is just over 1mn tonnes less than 2008. The aluminium smelting industry will have a tougher time due to high energy costs and increasing global competition as well as the country's lack of bauxite.

The US has a total of six companies operating 14 aluminium smelters using imported ores. A further four smelters have been temporarily mothballed and some smelters have closed furnaces, thereby reducing capacity. Local production has been adversely affected by high-energy costs and high alumina prices. Despite the reduction in smelting capacity, since 2005 the US's net imports as a percentage of apparent consumption have declined due to a rise in domestic production of primary aluminium, a decline in imports and a rise in exports. By 2008, the US was a net exporter. Even before the financial crisis began to take effect, over 30% of the US's smelting capacity had been idled, although domestic output continued to climb up until mid-2008 and dependence on imports fell. BMI believes that some smelting capacity currently idled will be permanently closed, which could include at least one of three smelters idled by Alcoa. On the upside, falling oil prices should enable smelting operations to negotiate lower electricity tariffs over the medium-term. By 2013, BMI believes total aluminium output will approach levels seen in 2008, but secondary smelters will increase their share of output.

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