SECTION 232 WRAP: US prices rise ahead of 25% import tariff, non-US markets wobble on trade diversion fears

Some steel product prices in the United States have risen in response to the looming introduction of 25% tariffs on imports, while sentiment in steel markets outside the US has been dampened by fears of potential shifts in trade flows.

US president Donald Trump signed the 25% tariff into law on March 8 after the conclusion of his government’s Section 232 investigation, and from Friday March 23 the tariff will apply to all steel imports from all origins – with the exception of Canada, Mexico and Australia.

Other countries are calling for an exemption, but only those three countries have been excluded so far.

The US imported 34.47 million tonnes of steel products in 2017, according to US Commerce Department statistics.

While US domestic prices for material such as cold-rolled coil (CRC) have jumped up since the tariffs were confirmed, steel markets in countries such as China and Turkey are stuttering in the run up to March 23.

American Metal Market’s monthly price assessment for US domestic welded tube & pipe prices jumped by $80-150 per short ton after the across-the-board, 25% tariff was officially proclaimed, with imported standard pipe prices rising $190 per short ton after overseas mills tacked the tariff amount onto their prices.

US plate prices rose to their highest point in nearly six years on March 9, with American Metal Market’s price assessment for cut-to-length plate at $900 per short ton, up 32.4% from $680 per short ton at the start of the year.

US domestic prices for obsolete scrap grades in Philadelphia settled with an increase of $15-21 per gross ton earlier in March, while the direction of US export scrap prices has been clouded by fears in Turkey about the effect of the tariffs on steel mills.

Uncertainty, weak sentiment outside the US 
Turkish mills have been far slower in their buying of import scrap cargoes since the tariffs were confirmed, which has also hurt sentiment and demand in the Indian import scrap market.

“The Indian market is a bit quiet at this time due to all this uncertainty caused by the US sanctions announcement. The major fear is the dumping of excess material into India,” one scrap seller said.

Lower demand for Turkish steel in the US could lead to a drop in steel production in Turkey and a reduction in demand for scrap imports there, according to the German steel recycling association, BDSV. 

“The Turks actually cut back some production, knowing they won’t be shipping or selling [as] much to the US in the near term, or until the dust settles on the Section 232 decision. So they need less scrap,” one trading source said.

The US imported 1.98 million tonnes of steel from Turkey in 2017, with CRC, hot-dipped galvanized (HDG) coil and rebar making up a significant part of those volumes.

Turkish export rebar prices have halted their recent upward momentum, with rebar cargoes previously sold to the US already being diverted to new destinations because of the tariffs. Sellers are said to be considering customers from Southeast Asia, Canada and Europe.

Turkey’s steel associations were relieved that Turkish exports to the US would be spared the 53% tariff mooted as a possible option by the US Commerce Department in its initial post-Section 232 recommendations, and said the tariffs will not affect Turkish exports to the US so long as they are applied evenly across the globe.

But the “exemptions [for] Mexico and Canada will cause several new problems and is not right,” Turkish Steel Exporters Assn (ÇIB) chairman Namik Ekinci said later.

In China, ferrous futures markets plunged during the morning trading session on Friday March 9 after Trump signed the tariffs into law, which also contributed to a fall in Chinese rebar prices in the days afterwards

Metal Bulletin’s fob index for Chinese rebar exports was $566.92 per tonne fob on Friday March 16, down from $578.75 per tonne on March 8.

The weakness in Chinese futures, combined with fears that Section 232 could lead to millions of tonnes of steel being diverted into India’s export markets, contributed to weaker Indian domestic billet prices and pig iron prices in the past 10 days, sources said.

Trade volume diversions from the sealing off of US markets could lead to 35 million tpy of excess material floating around the world looking for a new home, an Indian source told Metal Bulletin this week.

Meanwhile, the 25% import tariffs imposed by the United States will cause serious losses to Brazilian exports, and will have a significant negative effect on bilateral trade flows Brazil’s foreign trade ministry, MDIC, said.

Brazil was the largest supplier of semi-finished steel products to the US in 2017, shipping 3.78 million tonnes – most of which consisted of slab to be re-rolled by US mills.

Turkish rebar exports to the US, already subject to tariffs, will be further squeezed by 232 measures.

Section 232 investment choices
Mills both inside and outside the US have been poring over the potential impact of the Section 232 tariffs on their businesses.

Much to the chagrin of US steelmakers California Steel Industries and NLMK USA, which rely on imports of slab, imports of the semi-finished product have not been excluded from the trade restrictions

NLMK USA said its Russian parent company might withhold $600 million in potential investments in its US plants if there is no exemption for semi-finished goods. 

Austrian steelmaker Voestalpine has said that around 3% of its 2017 US revenues, of around €1.20 billion ($1.48 billion), could be affected by the US tariffs. Voestalpine exports high-grade steel from its Austrian production facilities for further processing at its US mills.

US firm SeAH Steel is planning to install a new tubing mill at its site in Houston, Texas, in response to the application of the tariffs, while US Steel plans to restart a blast furnace at its Granite City Works in Illinois by April, amid expectations of steel shortages after the tariffs are applied.
Tube & pipe manufacturer Vallourec USA is seeking an exclusion for Brazilian semi-finished steel tubes, after the tariffs forced the company to hit the brakes on exporting semi-finished tubes to the US for further processing.

The steel tariffs will have a minimal effect on exports by Brazilian steelmaker CSN, but could disturb the country’s domestic steel market, the mill said.

Diplomatic efforts ongoing
With steel imports from Australia, Canada and Mexico already exempted in principle, efforts are under way from other nations to avoid tariffs on their own steel exports to the US by the time the restriction come into force on midnight of Friday March 23.

The prospect of a bargain between the EU, the US and Japan involving action to reduce steel and aluminium overproduction while abiding by global trading laws was discussed in a meeting in Belgium with the EU and Japan both hoping to secure exemptions from the import duty.

France’s finance and economy minister, Bruno Le Maire, has said that the EU does not want to enter into “any type of trade war” with the US due to the duties, but said it will take the necessary steps to defend itself.

UK international trade secretary Liam Fox is traveling to US capital Washington DC to meet with US trade representative Robert Lighthizer and US commerce secretary Wilbur Ross to make the case for the UK, as part of the EU, to avoid the tariffs.

And Brazil, along with other countries, is considering filing a complaint with the World Trade Organization (WTO) against the application of the duties, according to the country’s president Michel Temer.

Additional reporting by Paul Lim in Singapore; Ana Camargo and Felipe Peroni in São Paulo; Viral Shah in London; Maria Tanatar in Dnepr, Ukraine; Cem Turken in Mugla, Turkey; Michael Cowden in Chicago; and Dom Yanchunas and Mei Ling Toh in New York.