FOCUS: China’s AD probe on stainless steel set to disrupt Asian market

China has launched an anti-dumping investigation into imports of stainless steel billet and slab, as well as stainless hot-rolled plate and coil produced in the European Union, Japan, South Korea and Indonesia, according to a notice by the country’s Ministry of Commerce on Monday July 23.

The period being investigated is the whole of 2017 while timeframe being probed to determine industrial damage is from January 1, 2014 to March 31, 2018.

The investigation started on Monday and will likely end by July 23, 2019, although the end-date might be extended to January 23, 2020 if special circumstances emerge, according to the notice.

The products under investigation are those classified under the following HS codes: 72189100, 72189900, 72191100, 72191200, 72191312, 72191319, 72191322, 72191329, 72191412, 72191419, 72191422, 72191429, 72192100, 72192200, 72192300, 72192410, 72192420, 72192430, 72201100 and 72201200.

The probe is the result of major Chinese producer Shanxi Taigang Stainless Steel (Tisco) filing an application on behalf of the country’s domestic industry, with backing from several other mills in China, the ministry said.

Tisco and the mills supporting the application collectively account for more than 50% of the total output of those products in China from 2014 until 2017, the ministry noted in its preliminary review.

China imported 1.15 million tonnes of stainless steel in 2017, up 55.83% from 2016, according to Stainless Steel Council of China Special Steel Enterprises Association.

Stainless hot rolled flats and billet accounted for more than 700,000 tonnes of that figure, or about 60% of that total, according to Chinese customs data.

Market participants expect the anti-dumping probe to slow down the import of these products, especially those from Indonesia.

“A number of re-rolling mills in China used Indonesia-origin stainless steel billet, slab and HRC to produce downstream products because prices are lower than domestic products,” a trader in east China said.

If import duties are imposed, Chinese re-rollers will ditch imports in favor of domestic products, which will support local prices.

China’s stainless steel prices rose slightly on Monday as a result of the bullish sentiment generated by the announcement of the probe.

Prices for 304 stainless HRC were at 14,600-14,700 yuan ($2,154-2,169) per tonne in the major market of Wuxi on Monday, up 100 yuan per tonne from last Friday, sources told Metal Bulletin. Those for 304 stainless cold-rolled coil also rose by the same amount to 15,500-15,900 yuan per tonne, they said.

Indonesian stainless steel exports from low-cost mills have been priced “aggressively” and at levels consistently below those for Chinese products, a Southeast Asian buyer source said. Indonesia’s growing presence in the region is squeezing China’s market share and worrying Chinese suppliers, as previously reported by Metal Bulletin.

“The anti-dumping probe might trigger retaliatory and protectionist measures by other countries, which will affect Chinese stainless exports,” a steel processor source in east China said.

“[Asia’s] stainless steel market might panic due to the investigation, and I expect business will be even more volatile in the second half of this year,” the processor source added.

A Southeast Asian trader pointed out that there was limited capacity within Asia to digest the stainless slab imports, particularly those from Indonesia, if China stops buying from abroad or slows down its purchases.

“China has many hot-rolling lines and Indonesian producers need to export [slab] to them. Otherwise [the Indonesian mills] may have to sell at higher prices or give up their market share in the region,” he said.

With the investigations set to last a year or more, it remains to be seen what kind of reaction will be triggered in the market until further details or timelines emerge, a trader in Taiwan said.

If any duties are imposed eventually, their impact on Tsingshan Holdings’ Indonesian operations will be a focal point for most market participants, sources in Asia said.

“Most people will be watching how this will affect Indonesia instead of mills in Europe, Japan and South Korea because we rarely hear of materials from those countries competing with Chinese products,” a trader in Taiwan said. “Recently more and more buyers [in China and other parts of Asia] have been importing Indonesian materials instead of Chinese materials.”

A buyer source in Southeast Asia likewise said that Tsingshan Indonesia would be the only mill feeling most of the pressure from the probe because the other producers are not threatening China’s market share and prices.

Tsingshan Indonesia might speed up their exports to other markets in Asia instead of China because of the investigation and if anti-dumping duties are introduced, the Taiwanese trader said. This could flood the rest of Asia with cheap Indonesian products, he added.

Indonesian producers might lower their export prices further to increase sales to other destinations in Asia, the buyer source said. “But I don’t think the European, Japanese and Korean mills will be affected much,” he added.

But a second domestic trader in China’s major market of Wuxi believes the probe might be “just symbolic and for appearance’s sake.” He is not expecting any significant anti-dumping duties to be imposed as a result of the probe.

A third trader in China is of the opinion that even if duties are imposed and imports fall as a result, the supply and demand balance in the country’s stainless steel market is unlikely to experience much of an effect.

“Compared to production, the total amount of imports is small,” he said.

China produced 25.77 million tonnes of crude stainless steel in 2017, up 4.7% year on year, according to the country’s stainless steel council.

A source at a Chinese stainless steel producer that is setting up operations in Indonesia said he was not worried because the company he works for already had “measures in place.” He declined to give further details.

“Anyway, it is only an investigation now and we still don’t know for sure whether duties will be introduced,” he said.

The upcoming Indonesian mill is expected to go online in 2019 and will supply stainless slab and hot-rolled coil to its Chinese parent.

“We have not started producing in Indonesia yet so there are currently no records of exports from our side to be investigated,” the source added.