US mills protest Evraz NA’s plea to exempt Russian slab from US 232

Nucor Corp and U.S. Steel Corp are objecting to Evraz North America’s request to exempt Russian slab imports from the United States' Section 232 tariffs, according to filings with the US Bureau of Industry and Security (BIS).

If successful, these objections could result in the denial of Evraz NA’s exemption request by the BIS and in turn could up-end the company’s long-established business model of importing semifinished steel, or alternatively could significantly boost Evraz NA’s production costs.

Evraz NA initially requested that some 1.1 million tonnes of Russian slabs be exempt from 25% Section 232 steel duties in filings starting on Tuesday April 24. Commerce has 90 days from the initial request to grant or deny the exemption, which puts a decision close to July 23.

Evraz NA can easily source steel slabs within the US, notably from mill suppliers like U.S. Steel, and so can’t argue that it is unable to find these steel products domestically, attorneys for Pittsburgh-based U.S. Steel and Charlotte, North Carolina-based Nucor argued in separate filings on May 23 but uploaded to the BIS website as late as June 4.

Evraz NA’s standard business model of importing “cheap” Russian slab from its Russian parent company “negatively impacts the entire domestic production chain,” Wiley Rein LLP attorneys wrote on behalf of Nucor, the largest US steelmaker.

“Steel slab that is melted and poured abroad and shipped to the United States is priced so low that, in many cases, it is less expensive than Nucor’s cost of production,” the attorneys wrote.

Evraz NA didn’t respond to a request for comment on Tuesday. In its initial exclusion request, the company specified an 8.3-million shortfall in domestic slab production capacity that contributed to 6.6 million tons of US slab imports in 2017 – a shortfall that US mills disputed.

Evraz NA also contended that there is “no viable commercial market for steel slabs” in terms of other US mills selling to the company, according to its April request. “Selling slabs to Evraz would place those [supplier] US companies at a competitive advantage commercially, as they would know a major component of Evraz costs.”

Of note, Evraz NA received one quote for US carbon slab at $720 per ton delivered to its Portland, Oregon, mill in April 2014, when American Metal Market’s hot-rolled coil price stood at $650 per ton – an inversion of the typical price spread. Slab is the raw material for hot band, and this example shows the commercial unfeasibility of Evraz NA buying US domestic slabs, the company claimed.

Evraz NA can continue to buy Russian slab, albeit with a surcharge of 25% by paying the Section 232 duties, Nucor and U.S. Steel pointed out. This would allow Evraz NA to maintain its business model. U.S. Steel is also happy to sell slab to Evraz NA and has “enormous incentive” to do so, U.S. Steel said.

“U.S. Steel has both the capacity and interest in selling significant volumes of slab in the US commercial market, as it did a decade ago,” the steelmaker said, noting that it signed a memorandum of understanding to sell “significant quantities” of slabs to Evraz NA’s Oregon mill in 2008, before the financial crisis scuttled the plan.

“Evraz’s own information indicates that even with a 25% duty on imports of slab from Russia, the cost of imports into the United States would still be $65 per ton below the price Evraz receives for exports of slab,” Nucor added.

Evraz NA’s 1-million-tonne-per-year Portland mill primarily makes plate, coiled plate and hot band.

American Metal Market assessed domestic cut-to-length carbon grade plate stood at $46.50 per hundredweight fob mill on June 1, while Metal Bulletin’s assessment of CIS export slab was at $510-515 per tonne fob Black Sea on June 4.

Still, Evraz NA warned of the perverse impacts of implementing a large tariff on imports of Russian slab.

South Korean plate and coils could “deluge” the western US market, where Evraz NA operates the only US plate mill, the company said. Evraz NA itself already has 250,000 tons at stake in long-term contract deals with US customers over the next three years that are heavily dependent on its slab imports, it added.