US duty circumvention probe on Chinese HRC inconsequential, Vietnam re-rollers say

Vietnamese steel re-rollers have dismissed the prospective findings of a duty circumvention probe announced by the United States as inconsequential, market sources in the Southeast Asian country have told Metal Bulletin.

The US Commerce Department said on Thursday May 17 that Vietnam-origin cold-rolled coil (CRC) and coated coil products made using China-origin substrate circumvented US import duties of 400-500% applied to Chinese flat-rolled steel, and that it would close this loophole.

The re-rollers justify their dismissal of the investigation because there are many origins other than China from which they can purchase hot-rolled coil (HRC) substrate, market participants said on May 18.

“Vietnamese re-rollers do not need to use only China-origin HRC for re-rolling purposes,” a source at a local re-roller said.

The alternative sources include Brazil, India, South Korea, Japan and Taiwan, traders said, adding that product from these suppliers can sometimes be of better quality than China-origin HRC.

Mills from these countries which are regularly heard to offer HRC to Vietnam include ArcelorMittal, Bhushan Steel, Jindal Power & Steel, Tata Steel, Posco, Hyundai Steel, JFE Steel and Nippon Steel & Sumitomo Metal Corp. The material can be supplied either through back-to-back business or position cargoes from traders’ inventories.

“It is very easy for re-rollers to prove to US Customs officials that their substrate is not from China, because the coil numbers can be easily tracked and shown to be from other origins. So Vietnamese re-rollers will not have any issue providing evidence,” a Vietnamese trader said.

New domestic HRC capacities in Vietnam would also reduce the effect of the circumvention probe findings.

“There are significant HRC capacities that have started within the past year that will reduce the demand for China-origin HRC,” a source at a second re-roller said.

Major domestic producer Formosa Ha Tinh fired up its second blast furnace on May 18, and is on track to increase its own HRC capacity to 5.2 million tonnes per year once this is fully operational.

Formosa Ha Tinh currently supplies about 200,000 tonnes per month of HRC to domestic buyers, with industry sources noting that its HRC is good enough and suitable for downstream re-rolling.

Vietnam imported 9.4 million tonnes of hot-rolled sheet and strip in 2016, according to statistics from the South East Asia Iron & Steel Institute.

Its HRC import volumes comprise almost half of the appetite of the major economies in the Association of Southeast Asian Nations (Asean), with import volumes for Indonesia, Malaysia, the Philippines, Singapore and Thailand paling in comparison.

Importing HRC and processing it into CRC, hot-dipped galvanized coil (HDG), color-coated coil (PPGI) and other flat steel products has long been a staple of the Vietnamese flat steel industry, which has numerous re-rollers throughout the country. These include majors such as Hoa Sen, Nam Kim Steel and Ton Dong A.

These re-rollers ship the processed flat steel to worldwide destinations, including Australia, the Middle East, Africa, the US and Europe, where it is used in various downstream sectors such as the construction and automotive industries, and often at prices which undercut material from local producers.

The US Commerce Department’s decision to close the circumvention loophole and to apply the 400-500% duty will be on top of the 25% import tariff which the US is planning to impose on all steel imports, and which is expected to have more significant consequences for the Vietnamese steel industry as a whole.

The US imported 871,153 tonnes of Vietnam-origin steel in 2016 and 679,092 tonnes in 2017.

Within these totals, the largest quantities comprised cold-rolled sheet, hot-dipped galvanized sheet and strip, and other metallic-coated sheet and strip.