Section 232 tariffs on steel and aluminium imports into the United States will be difficult to unwind no matter who wins the presidential election in November, following domestic steelmakers’ plans for new capacity that seeks to displace imports, according to a top executive at ArcelorMittal.
That extra capacity could pressure the Luxembourg-based steelmaker’s margins, Mittal conceded.
“That’s a fair comment,” he said. “But at the same time, as we mentioned earlier, we’re very focused on making structural fixed cost savings, so clearly we will be reducing the cost base of our business, and so that should offset some of those pressures.”
But it is difficult to “variabilize” fixed costs in the United States-Mexico-Canada Agreement due to the company’s union employees, who have defined benefits such as pensions and healthcare, according to Mittal.
“Nevertheless, I do expect that, in the third quarter, the fixed-cost-per-ton rates in [the USMCA] will be stable,” he said.
The world’s largest steelmaker produced 3.7 million tonnes of crude steel in North America in the second quarter of 2020, down 33.8% from 5.59 million tonnes in the second quarter of 2019. It shipped 3.8 million tonnes of steel in the region, 30.2% lower than 5.44 million tonnes in the same comparison.
Quarterly average selling prices in the region dropped 6.3% year over year to $670 per ton ($33.50 per hundredweight) from $715 per ton, while quarterly sales plummeted 45.2% to $2.77 million from $5.06 million.
“When we look on a historical basis, spreads are very low,” Mittal said about prices worldwide. “We’ve seen in the past that these levels of spreads do not last very long, but today we can see that these spreads are prevalent in the markets in which we operate.”
He declined to provide guidance on which furnaces the company would bring back online following Covid-19-related idlings beyond those already announced.
The company expects demand to improve in the second half of this year following one of the most difficult periods in its history in the first half.
ArcelorMittal USA will indefinitely lay off 454 employees at its Cleveland operations beginning August 1, on top of furloughs announced earlier.
Fastmarkets’ daily steel hot-rolled coil index, fob mill US was calculated at $22.29 per hundredweight ($447.80 per ton) on July 30, up by 1% from $22.08 per cwt on Wednesday and 1.5% from $21.95 per cwt on July 23.