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Numerous sources indicate that a decision by President Donald Trump’s administration to impose 25% tariffs on finished steel imports from Canada is a short-term bargaining tool designed to coerce that nation into making North American Free Trade Agreement (Nafta) concessions. No one sees the harsh decision as being a long-term situation.
Canada exports 45% of its domestic steel production to the US, according to data from the Canadian Steel Producers Association.
The stiff tariffs have angered Canadian scrap suppliers, with one awaiting the fallout in the June round of scrap buys.
“We should know around Wednesday [June 6]. Mr. Trump is not nice. I think it’s a Nafta negotiation tactic,” one ferrous scrap supplier source said.
“I think this is Trump’s way of getting [Prime Minister Justin] Trudeau to make some concessions with Nafta,” a second scrap supplier agreed.
A third scrap supplier to the US and Canadian markets doesn’t expect the news to implode order books at Canadian flat-rolled mills. “It is still too early to see how this is going to play out, but customers at US auto programs buy from approved suppliers who ship ‘just in time’ on annual contracts. Stamping plants cannot turn on a dime and Canada mills will keep shipping [coil] to the US,” he said.
With US flat-rolled mills running full out, the third supplier said the decision will still raise hot-rolled coil prices in the US and hurt end-users, who will absorb the higher cost.
A fourth supplier agreed that Canadian mills’ order books are unlikely to collapse. “Steel prices are too strong. Canada will continue to offer steel to [the] US until which point that the US domestic prices get too high. For the most part, it will be business as usual. I don’t know if 25% is enough to stop this powerful steel market. This is not Trump retaliating against steel, it is Trump pushing his Nafta agenda,” this supplier said.
Numerous sources indicated that Canadian ferrous scrap shipments to the US have no ramifications for the market since imports of the product are not included in the Section 232 tariffs.
A Canadian consumer was still trying to digest the news. “I am not clear on [the] short-term impacts as I don’t believe scrap is included. Therefore, we should not see an oversupply of primes up here due to tariffs being applied,” he said.
A second consumer was unfazed by the news, noting that “order books remain strong and it’s business as usual.”
US ferrous scrap imports from Canada totaled 190,849 tonnes in March, of which 51,351 tonnes was No. 1 bundles.
Canadian mills that sell finished steel into the US might seek relief on their raw material costs, a fifth scrap supplier said. “Mills may try to lower the price of scrap because they are facing big tariffs,” the fifth supplier said.
Other questions remain in what a sixth supplier described as a day of chaos and craziness. “Is the border patrol prepared to check papers at the border today for tariffs? Does this open up the US for a lawsuit because the tariff is a direct violation of Nafta and illegal? So many questions are still unfolding,” this supplier said.
No. 1 busheling in Hamilton is selling for Canadian $373 ($288.98) per net ton, according to American Metal Market’s latest assessment on May 7.