ASIA STEEL FOCUS: Taiwanese ban on Chinese steel could disrupt regional trade flow

A potential ban on Chinese steel imports by Taiwan could disrupt trade flows in Asia, with the stainless steel segment set to be hardest hit, market sources told Metal Bulletin this week.

“The ban is necessary so that Taiwan can start negotiations with the United States to be exempted from the [country’s] Section 232 tariffs [on steel and aluminium imports],” a Taiwanese trader said.

Several industry sources in Asia believe Taiwan’s ban – if it materializes – would apply to both cargoes meant for domestic consumption in the island as well as those meant for processing before being subsequently exported to other destinations.

No official announcement has been published so far but several sources in Taiwan said government officials had reached out to them over the implementation of such a move.

“Even if it is just a rumor, Taiwanese buyers will be very reluctant to place orders for products from China because it’s simply too risky [in case future shipments are prevented from entering Taiwan],” a stainless steel mill source in China said.

If implemented, the ban is expected to disrupt Asian steel trade flows, especially for stainless steel since Taiwan is the biggest importer of these products from China, market participants said.

Big buyer
Taiwan received the largest share of China’s total stainless exports last year, at 21%, or 786,700 tonnes, according to a US Department of Commerce report.

During the first two months of 2018, Taiwan accounted for 22% of stainless flats shipped from China.

China shipped a total of 1.63 million tonnes of finished steel to Taiwan last year, of which 780,236 tonnes were stainless flat steel, according to Chinese customs data.

Market participants in the Chinese mainland have expressed concern over the possibility of other export destinations, especially those in Asia, considering a similar move against Chinese steel.

Asian buyers procured 80% of all Chinese stainless flat steel exports in the first two months of this year.

The Taiwanese government is said to be looking to block China-origin flat products, especially hot-rolled coil, hot-rolled plate, cold-rolled coil – annealed and full hard, according to a trader based in the territory.

“Local mills have been importing these Chinese products for coating and processing, before selling the value-added products to the US,” the trader said.

The US saw its steel imports from Taiwan rise from 983,245 tonnes in 2016 to 1.12 million tonnes last year. Of last year’s total, 340,415 tonnes consisted of metallic-coated sheet and strip, 212,368 tonnes were hot-dipped galvanized sheet and strip, and 129,298 tonnes were oil country tubular goods.

The US also imported 133,807 tonnes of stainless steel from Taiwan last year, including 49,882 tonnes of cold-rolled stainless steel sheet, 33,875 tonnes of stainless steel pipe and tubing as well as 21,136 tonnes of cold-finished stainless steel bar.

Another producer source in south China said there was a possibility for stainless steel to be excluded from the potential ban because many Taiwanese mills rely on materials from their counterparts in the mainland.

One East Asian stainless steel buyer source said that Taiwan might decide to impose anti-dumping duties instead of a blanket ban.

“Otherwise, if the measure is too extreme and protectionist, international authorities such as the World Trade Organization might become involved,” he said.

Stumbling block
Traders in Taiwan anticipate a ban to have a significant impact on the territory’s stainless steel segment.

“About 70-80% of stainless steel imported to Taiwan is from China,” a second trader on the island said.

Taiwanese stainless steel mills will likely face supply issues and be driven to import more materials from other countries, especially Indonesia, several sources said.

Tsingshan Group Holdings, one of China’s largest stainless steel producer, started its Indonesian operations late last year. It has been producing hot-rolled stainless steel in the Southeast Asian country to export to the rest of Asia, Metal Bulletin understands.

Aside from Tsingshan Indonesia, Taiwanese buyers might have to look for alternative sources such as Europe and India, according to a trader in Southeast Asia who handles Chinese materials.

But buyers in Southeast Asian who procure value-added stainless steel from Taiwan might not accept the quality of products processed from non-Chinese materials, which could dampen Taiwan’s sales.

“If Taiwanese mills cannot get stainless hot-rolled coil from [major Chinese producers], some of their customers who want products of better quality will purchase directly from China,” the Southeast Asia-based trader said.

A ban will also worsen oversupply for the Chinese stainless steel sector and push prices down further, another trader in east China said.

However, some market participants think a ban on Chinese products would not have that great an effect on Taiwan’s stainless steel sector.

“Taiwan has its own stainless steel producers too, so if they can produce more and export less, they might be able to meet domestic demand,” a supplier source in China said.

The second Taiwan-based trader reckons that domestic mills have enough capacity to supply to local consumers, in addition to them importing from other countries, but stainless steel products will become more expensive in Taiwan.

“The market will need some time to adjust, and it’s difficult to say how much Taiwan’s prices will rise,” he said.

Metal Bulletin’s assessment of prices for benchmark 304 stainless 2mm trimmed cold-rolled coil was $2,080-2,130 per tonne cif East Asian ports for the week ended April 4, down $10-50 per tonne week on week. As for stainless hot-rolled sheet, the price assessment for the same period was $2,040-2,140 per tonne cif, down $10-30 per tonne from a week earlier.

Carbon steel
On the other hand, a ban on Chinese steel imports in Taiwan will not have that big an impact on China’s carbon steel segment, sources said.

Taiwan does not import large quantities of carbon steel from China, according to data from the territory’s Ministry of Finance.

Last year, Taiwan imported 26,274 tonnes of alloyed flat-rolled steel under HS Code 7225 and 9,766 tonnes of non-alloyed flat-rolled steel under HS code 7208 from China. It also imported 12,143 tonnes of Chinese non-alloyed wire rod under HS code 7217. It did not import any rebar or rod in coils from China last year.

Taiwanese trade authorities are negotiating with their US counterparts to gain exemption from the proposed Section 232 tariffs of 25% on steel imports.

Taiwan’s Ministry of Economic Affairs said in late March that it was “disappointed” that the territory was not among a list of countries for which the tariffs are temporarily waived while talks for permanent exemptions take place.

“The Taiwan government will communicate fully with the US and strive for exemptions. It will also assist the steel industry in submitting product exclusion applications and pay close attention to the ongoing case,” the ministry said.