FOCUS: Taiwan, S Korean steelmakers to see shrinking HRC demand from Vietnamese CRC exporters to US after imposition of new duties

Taiwanese and South Korean hot-rolled coil (HRC) producers, as well as major international trading companies, will likely to be hit by new US duties imposed this week on cold-rolled steel imports from Vietnam, market sources told Fastmarkets MB today.

Vietnamese corrosion-resistant steel and cold-rolled coils (CRC) produced from South Korean and Taiwanese HRC substrate will face new cash duties of up to 456.23% from the United States from July 2, the US Department of Commerce said. This is on top of 25% tariffs presently being imposed under Section 232 regulations.

These duties will be imposed on future imports and any unliquidated entries since August 2, 2018.

The new tariffs mean imports into the US of Vietnamese corrosion-resistant steel and CRC using South Korean and Taiwanese substrate will become a lot more expensive and less competitive.

“A Taiwanese steel major and a South Korean steel major will see the biggest impact from this and may suffer from less opportunities in one of their more significant downstream markets,” a buyer source at a major Vietnamese re-roller said.

Vietnamese re-rollers which are invested in by Taiwanese and South Korean steelmakers will have the highest exposure to the new duties, because they are the ones which import more HRC substrate from their owners, market sources said. These includes two re-rollers with production plants in South Vietnam’s Phu My and Ba Ria cities.

Taiwan exported 1.7 million tonnes of HRC to Vietnam in January-April this year. It exported 4.52 million tonnes of HRC to Vietnam in 2018.

South Korea exported 382,801 tonnes of HRC to Vietnam in January-May this year. It exported 745,573 tonnes of HRC to Vietnam in 2018.

“Others which depend on domestically-produced HRC from Formosa Ha Tinh Steel Corp (on the north central coast of Vietnam) will see lesser risk,” a Vietnamese trader said. This is also likely to boost demand for Formosa Ha Tinh Steel Corp’s HRC supply, sources said.

Import prices for HRC into Vietnam have not seen significant changes on the Wednesday morning after the announcement, with prices being supported by higher raw materials prices this week.

Bids were at $515 per tonne cfr Vietnam, while offers for Indian and Chinese cargoes were at $517-525 per tonne cfr Vietnam. Negotiation levels are at least $5-10 per tonne higher than Fastmarket’s assessment of $510 per tonne cfr Vietnam on Monday July 1.

Fewer opportunities for traders
Traders which are actively moving Vietnamese coated steel and cold-rolled coil to the US will also see fewer trading opportunities once this US-Asian arbitrage windownarrows.

“They will definitely have to cut their arbitrage volumes to the US, especially two international trading companies which have been very active in this segment,” a flat steel trader in northeast Asia told Fastmarkets MB.

The US imported 74,859 tonnes of Vietnamese hot-dipped galvanized sheet and strip in January-April 2019, up from 64,554 tonnes imported in the same period last year.

It also imported 70,369 tonnes of cold-rolled coil in January-April 2019, up from 77,888 tonnes imported in the same period last year.

The anti-dumping inquiries were conducted due to requests from domestic producers in the US, such as Steel Dynamics, California Steel Industries, AK Steel Corporation, ArcelorMittal USA, Nucor Corporation and United States Steel Corporation.

Concerns over excess CRC supply
Export traders in China expressed concerns over the possibility of excess supply in downstream cold-rolled coil and hot-dipped galvanized coil markets in Southeast Asia.

“Material that was previously sold to the US may now compete with Chinese exports, which is likely to weigh on prices,” a trader in Hangzhou said.

Southeast Asia has been the main export market for Chinese CRC recently, with larger quantities booked as compared with other regions, a trader in Tianjin said.

Trading activity in the Middle East is experiencing a slowdown during the summer months, while South American buyers were unwilling to accept higher asking prices from Chinese mills after production cuts were announced in the country’s steelmaking hub of Tangshan.

Multiple cargoes of CRC were sold to Southeast Asia at $535-540 per tonne fob China during the week to Tuesday July 2.

Fastmarkets MB’s weekly export price assessment for Chinese SPCC 1mm CRC was $535-545 per tonne fob China on Tuesday July 2, up $10-15 per tonne from a week earlier.

Fastmarkets MB’s weekly export price assessment for Chinese 1mm 120g zinc-coated HDG was $595-605 per tonne fob China on Tuesday, up by $15-20 per tonne week on week.

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