Section 232 tariffs on slabs will hurt US West Coast, California Steel Industries says
California Steel Industries wants slabs to be excluded from the blanket 25% Section 232 tariffs on foreign steel that US President Donald Trump want to impose.
The West Coast slab converter said it relies almost entirely on imported slabs as a substrate to make flat-rolled steel and electric-resistance-welded (ERW) pipe.
The company buys its slabs mostly from Mexico, Brazil and Japan. The 1.5 million tons CSI imports annually also make it the port of Los Angeles’ largest customer by tonnage.
CSI imports slabs in large part because US-made material is “not commercially available … on any consistent basis,” according to a press release dated Monday March 5.
“Our model allows us to maintain our operations in California and comply with [the] strict environmental regulations of our home state,” CSI president and chief executive officer Marcelo Botelho Rodrigues said in the statement.
California’s strict environmental laws are part of the reason there are few mills melting steel in the state. CSI was created from the rolling mills of the former Kaiser Steel - whose defunct hot end was featured in the movie Terminator 2 - in 1984.
Foreign slabs historically have accounted for 6.3% of total US steel demand, Rodrigues said. He noted that US integrated mills also import slabs and that trade cases have never targeted foreign slabs.
Domestic integrated mills have been among the most vocal proponents of action under Section 232. But some of them import slabs to supplement their output when the market is strong.
“So imported slabs are not part of the problem but part of the solution, particularly in the western US,” Rodrigues said. That said, CSI has participated in trade petitions against “unfairly” traded finished steel products.
CSI is a 50-50 joint venture between Japan’s JFE Steel Corp and Brazil’s Vale. The company employs approximately 1,000 people and is the leading steel supplier to the western United States. It makes hot-rolled, cold-rolled and galvanized flat-rolled steel as well as ERW pipe up to 24 inches wide.
The US imported 7.53 million tonnes of semifinished goods - blooms, billets and slabs - in 2017, according to US Commerce Department figures. That’s up nearly 27% from 5.93 million tonnes in 2016 and 16.2% from 6.48 million tonnes in 2015.
Brazil, with 3.78 million tonnes, was the top foreign supplier to the US, followed by Russia with 2.14 million tonnes and Mexico with 836,181 tonnes. Japan weighed in at No. 4 with 360,109 tonnes.
Japan has been one of the fiercest opponents of the Section 232 tariffs.
“It is likely that US actions taken pursuant to Section 232 will create a negative chain reaction affecting not only steel but also other products considered to have national security implications,” The Japan Iron and Steel Federation said in a letter addressed to Trump and dated March 2.
Other countries are likely to follow the US and enact similar duties on national security pretenses, the group said.