Section 232 tariffs to hit EU-origin stainless import volumes into US, Damstahl says

Import volumes of stainless steel into the United States from European mills are likely to fall sharply once US President Donald Trump’s Section 232 tariffs on imported steel are imposed, Danish distributor Damstahl said this week.

The 25% tariff on imported steel will come into effect on Friday March 23 at 12:01am New York time.

Around 350,000 tonnes, or 60% of total flat stainless steel imports into the US, “could disappear” following the imposition of the tariff, according to estimates from metals market research company SMR, cited by Damstahl.

In comparison, around 150,000 tonnes, or 70% of total long stainless steel imports into the US, could similarly disappear following the imposition of tariffs, according to SMR.

The share of apparent consumption in 2017 taken by all stainless steel flat product imports in the US market fell to around 22%, or roughly 750,000 tonnes, compared with 26% in 2014.

Imports of stainless steel flat products from Europe into the US averaged 158,000 tonnes per year over 2015-17.

Taiwan, Mexico and China were the three largest sources of stainless imports into the US over 2015-17, while France, Belgium and Italy are the three largest European flat stainless steel import sources into the US market, Damstahl said.

Stainless steel long product imports hold a significant share of US domestic apparent consumption, rising by 22% year-on-year to reach a 90% share of apparent consumption in 2017. This is roughly equivalent to 260,000 tonnes.

Imports of stainless steel long products from Europe into the US averaged 89,000 tpy over 2015-17.

Italy is the second-largest exporter of stainless steel long products into the US, behind India, while Germany, France and Sweden also export “substantial volumes,” Damstahl said.

“[The imposition of US tariffs will lead to domestic] oversupply from European mills, and additional imports from Asia will flood the European market – until the EU is forced to react with tariffs or quotas as well,” Damstahl said.

“European mills will not be able to absorb a 25% tariff on steel imports. If prices do not increase, this volume will be ‘lost’,” Damstahl said.

“If prices in the US increase by 25%, European mills will be back in the market,” it added.

EU markets
European domestic stainless demand is “still driven by full order books at customers, and prices are showing an upward trend,” Damstahl said.

EU construction activity rose by 1.50% year-on-year in December 2017, while the German electronics industry reported a 7% year-on-year increase in revenue in 2017, and new EU passenger car registrations increased by 4.30% year-on-year in February 2018.

Revenue in Germany’s mechanical engineering sector rose by 3% year-on-year in 2017, while incoming orders from EU member states rose by 13% year-on-year in September-November 2017.

German stainless prices have been stable so far in 2018, but are expected to rise due to a higher second-quarter ferro-chrome benchmark price and increasing base prices, Damstahl said.

Metal Bulletin’s European high-carbon ferro-chrome benchmark indicator suggests that the second-quarter benchmark will be $1.41 per lb, if settled on March 16.

Incoming stainless steel orders placed at German mills appear “healthy” while exports to Spain, Germany and France are increasing, Damstahl said.

End-users in the Netherlands and Sweden have strong order books, which will support demand in the coming months as well as higher stainless steel prices. Lead times are lengthening for both flat and long products at European mills.

Danish stainless market activity is “slow,” according to Damstahl, while the market situation in Norway is improving.

Delivery times from Finnish steel mills are longer than in 2017, but inventories are “generally on a good level,” Damstahl said.

Despite strong market fundamentals, the large price gap between European and Asian prices for stainless steel is making it difficult to raise EU base prices, according to Spanish stainless producer Acerinox.