US imported flat-steel prices mixed on Section 232 paralysis

Prices for imported flat-rolled steel into the United States are mixed amid confusion about how potential changes to the Section 232 trade measures might affect the steel supply chain.

American Metal Market’s price range for imported hot-rolled coil has slipped, that for cold-rolled coil held even, and prices for galvanized material inched up.

Still, deals aren’t easy to come by, according to sources. “The end-users are in wait-and-see mode,” one East Coast trader said. “It doesn’t make sense for US buyers to book too far out when no one knows what will happen in May.”

232 paralysis
Next month, President Donald Trump could decide to extend or revoke exemptions to the 232 tariffs. His administration also might opt to place quotas on steel from countries that are currently exempt from duties, mill and trader sources said.

Also in question is how quota mechanisms, like the one South Korea has agreed to, will work in practice. Nations subject to quotas will likely have to divvy up export licenses among mills in no mood to share them, a process that could prove chaotic, sources said.

“Even the countries that are exempted don’t know how the quota system is going to work,” a southern steel buyer said.

Raw material prices could also come under pressure as a result of Section 232, a second East Coast trader said. Big steel-consuming nations such as Turkey and Russia don’t know whether they will remain subject to 232 duties and so can’t accurately forecast their raw material needs.

As a result, prices for everything from iron ore and coal to hot-briquetted iron could be affected.

“It’s a state of total confusion,” the second East Coast trader said. “We’re paralyzed… And It’s beyond [finished] steel products now. It’s a total mess everywhere.”

Despite uncertainty over how the Section 232 might be implemented next month, traders generally agreed that the tariffs could pose a risk to US supply chains because some items - such as light-gauge galvanized coil - are not available in sufficient quality or quantity to meet the needs of domestic manufacturers of products as diverse as office furniture, electrical sockets and gutters.

“There are things made offshore that are not produced here… And if we don’t exempt those… it will eventually affect [big markets such as] automotive and appliance,” one Midwest distributor warned.

Hot-rolled falls
American Metal Market’s price assessment for imported hot-rolled coil has widened downward to $795-880 per ton from $840-890 per ton previously.

That range reflects Mexican steel available to the Gulf Coast in a matter of weeks, European and Turkish material slated to arrive in late June or July, and South Korean steel that might not arrive until September, trader sources said.

Mexican mills have succeeded in marketing themselves as “domestic light” and are making the most of their current 232 exemption as well as their freight advantage over other foreign sources, one Gulf Coast trader said. They also face fewer risks should their exclusion expire or should quotas be imposed, given that trucks are easier to divert than ships.

With domestic hot-rolled coil prices at high levels - $859.80 per ton, according to American Metal Market’s hot-rolled coil index - Turkish material might be competitive with US prices even once the 25% 232 duties on steel are taken into account, some trader sources said. But others contended that Turkish offers would be attractive to US buyers only if the country succeeds in gaining an exemption to the trade measures.

Hot-rolled coil from Europe is also about on par with US offerings, assuming the European Union remains exempt from Section 232 tariffs. If the EU loses its 232 exemption, US buyers will in most cases be on the hook for duties, trader and mill sources agreed.

“High rollers” in the US with an appetite for risk are booking European tons, as are smaller consumers looking to trial steel from new suppliers, the second East Coast trader source said.

When it comes to South Korean hot band, most buyers are leery of placing orders for steel that might not arrive until September. But such calculations might be different on the West Coast, where buyers are in some cases able to source only a fraction of their usual requirements from local mills, a West Coast distributor said.

Cold-rolled flat
American Metal Market's price assessment for imported cold-rolled coil is unchanged at $980-1,030 per ton.

The higher end of the range reflects Mexican offers, which are comparable to prices from US mills. The lower end of the range represents offers from countries not exempt from 232 duties, such as Turkey and Vietnam, sources said.

And US customers aren’t itching to buy, traders said. Customers think Mexican prices are too high, and they are concerned that Vietnamese material - which is not slated to arrive in Houston until September - might hit the docks after US prices have corrected.

Some also fear Vietnamese material could be subject to scrutiny from US trade officials because of a duty-circumvention case targeting cold-rolled and coated product from Vietnam that is made with Chinese substrate.

While hot-rolled prices are up, the unchanged cold-rolled price assessment might result from Russian offers at least temporarily withdrawing from the market, the East Coast traders said. Russia had previously provided a floor to cold-rolled coil prices, especially in the northeastern United States, but exports from that country could dwindle on fears that sanctions against Russian aluminum producer UC Rusal could be extended to steel interests as well, they said.

Galvanized rises
American Metal Market’s price assessment for hot-dipped galvanized material with a G30 coating in thicknesses of 0.012-0.015 inches has narrowed upward to $1,160-1,200 per ton from $1,100-1,200 per ton previously.

That price is representative of Middle Eastern product, for example, which is expected to arrive in Houston in August or September, trader sources said. The price might be high, but US buyers of light gauge galvanized material have little choice but to pay or risk running out of steel.

“They are panicking… US mills don’t make the steel you need to make [filing] drawers,” the second East Coast trader said.

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