LATIN AMERICA FLAT STEEL WRAP: All eyes on impact of US trade measures

Throughout March, the Brazilian steel market has been questioning the likely impact of the steel import tariffs being imposed by the United States following its Section 232 investigation.

Although current conditions point to the exemption of Brazil from the trade measures, mills in the country have been preparing to deal with possible tariffs.

According to Brazilian flat steel association Inda, for instance, the local market is not expected to be affected by the US tariffs because the current volumes of flat steel shipments to the US from Brazil will be absorbed domestically.

Brazil-based flat steel producer CSN said that the 370,000 tonnes of galvanized steel products that it exported to the US last year will now be redirected to the Brazilian market.

But a metals analyst raised a relevant question while speaking with Metal Bulletin: “Do you think it is realistic for the exported material simply to be absorbed into the domestic market? If so, why has that not been the case up to now?”

Of course, volumes as large as this cannot be redirected at a moment’s notice, but mills such as CSN have been trying to sell more material domestically since the fourth quarter of 2017.

Last year, Brazilian flat steel exports to the US totaled 376,374 tonnes, against 504,338 tonnes a year earlier, according to figures from the country’s foreign trade ministry, MDIC.

In December, for instance, shipments came to only 23,485 tonnes, down from 2017’s monthly peak of 68,228 tonnes in June, MDIC data show.

Meanwhile, Brazil’s own flat steel import volumes rose to 1.31 million tonnes last year, from 665,386 tonnes in 2016. Of this amount, 698,472 tonnes came from China, up from 387,371 tonnes.

This level of imports could be reduced to make more room for Brazilian steel on the domestic market, the metals analyst said.

Brazil is, however, concerned about the redirection of steel volumes previously exported to the US following that country’s imposition of a 25% tariff on steel imports from most countries.

As a result, the Brazilian government will monitor imports of steel products in order to detect whether there is any diversion, according to national steel institute Aço Brasil.

Flat steel imports
Import prices for flat steel goods into South America countries, including Brazil, showed stability at the end of March, with values below those recorded at the beginning of the month.

Metal Bulletin’s weekly price assessment for hot-rolled coil (HRC) imported into the region was $640-650 per tonne cfr on March 23, compared with $650-670 per tonne cfr on March 2.

Late-March prices were affected by trade tensions between the US and China, which led to a fall in Chinese steel values.

These drops partially offset the gains reported early in March, when import prices into South America surged upward, with mills in China returning to the market with high-priced offers after the Chinese New Year holiday.

Flat steel prices in China may continue to face a downtrend in the short term but are not expected to tumble in the medium or long term, according to regional sources. So import prices can be expected to remain at high levels and potentially create room for price adjustments in local markets, such as in Brazil.

On March 27, CSN said that it planned to raise flat steel prices by 7.5% in June due to a better domestic market and higher prices for flat steel products in the international market.