US Section 232 would redirect steel imports into EU, sources say
If US President Donald Trump approves Section 232 recommendations made by the country’s Commerce Department, it could threaten the European steel market with export reduction and the growth of redirected import flows, sources told Metal Bulletin.
The decision, however, might also allow European exporters to sell increased quantities of long steel products into the US market, should President Trump enforce steep duties on Europe’s competing exporters.
European steel association Eurofer has warned the US that the deployment of blanket trade restrictions as part of a Section 232 remedy will almost certainly be contested by World Trade Organization (WTO) countries and trigger prompt retaliation. This could seriously and unfairly injure EU producers, breaking the fragile recovery the sector has undergone in the past few months.
Trump received the Section 232 report on steel imports into the US on February 16. US Commerce Department Secretary Wilbur Ross has recommended massive across-the-board tariffs and restrictive quotas following the department’s Section 232 investigations into steel and aluminium imports.
The Section 232 report, commissioned in April 2017, is the result of US legislation that permits import restrictions on national security grounds.
The two alternatives are either for a “global” tariff or quota, or for tariffs on a “subset” of countries.
The “global” alternative would see a likely quota of 63% on 2017 import levels or a duty of 24% applied to all countries and possibly to all steel products.
The country-specific “subset” alternative would see tariffs on Brazil, South Korea, Russia, Turkey, India, Vietnam, China, Thailand, South Africa, Egypt, Malaysia and Costa Rica, with all other countries limited to 100% of their 2017 import level.
Flat steel products
The European coil market might face import growth from countries involved in the Section 232 report and experience a decline of higher-grade product exports, according to market sources.
“The fact is: imports into the EU are on a very high level already. The obvious threat is that more steel from foreign countries will be redirected to the EU market,” a spokesman for German steelmaker Salzgitter said.
Yet the potential negative effect from growing imports is likely to be partially offset by existing trade defense measures in the EU, sources told Metal Bulletin.
“The European Commission [EC] shielded the European market with anti-dumping duties for coil from a number of countries,” a Northern European trader said.
The EC set anti-dumping duties on hot-rolled coil (HRC) from China, Russia, Brazil, Iran and Ukraine, tariffs on cold-rolled coil (CRC) from Russia and China as well as measures into hot-dipped galvanized coil (HDG) from China.
“Obviously there is a risk of import growth from some countries like Turkey, but I do not think that Europe is going to be flooded by imported coil,” he added.
“Turkey has already been increasing its coil exports to Europe and is unlikely to be involved in any trade case,” a southern European trader said. “So if Turkey has to redirect volumes from the US to Europe it might be a problem.”
The EU and Turkey are linked by a customs union agreement, which came into force in December 1995.
Turkey increased its export of HRC to Europe 85.21% year on year to 1.89 million tonnes for the full-year 2017, according to data released by Eurofer.
European steelmakers are mainly shipping higher added-value steel products to the US, according to market sources. Therefore, it has not been putting pressure on the commodity steel market in the US.
Depending on the decision on the Section 232 proposal, Europe might see its export volumes drop though, sources said.
The EU exported 548,000 tonnes of HRC to the US in 2017, according to data provided by Eurofer.
“At this point in time – even after the recent announcements by the US Secretary of Commerce – no conclusions can yet be drawn on products or companies that are actually affected,” a spokesman for Austrian steelmaker Voestalpine said.
Although any decision on Section 232 is unlikely to have any major change in the heavy steel plate export market in Europe, market sources say.
The EU has already decreased its deliveries to the US after the country’s Department of Commerce set definitive anti-dumping duties on heavy steel plate from eight countries, including Germany, Austria, France, Italy and Belgium on March 30 last year.
Heavy plate exports from Europe to the US dropped 64.31% on an annual basis to 111,000 tonnes in 2017, according to Eurofer.
“We are not particularly concerned with the announcements or new measures for deliveries to the USA, insofar as we are already affected by customs duties and therefore have largely withdrawn from the US market. The US market therefore plays a small role for Dillinger today,” a representative of German steelmaker the Dillinger Group said.
“Overall, we expect a sealing-off of the American market, a further distortion of competition and diversion effects in the flow of goods. Here, the EU Commission must ensure that there are fair conditions for European manufacturers, and we do not see the European market flooded with import volumes at dumping prices,” the company added.
Long steel products
European exporters could find opportunities to sell larger quantities of long steel products into the US market, should President Trump enforce steep duties on competing exporters, market participants told Metal Bulletin this week.
“We don’t know yet what action the US President will take on Section 232 but this could create a window of opportunity for Western European long steel mills,” one Southern European producer source said.
“At the moment, EU long steel mills are not selling much into the US – Spain’s Megasa perhaps sells around 30,000 tonnes of rebar every few months, while Italian mills have maybe only sold 40,000 tonnes [of rebar] over the last few years,” the same producer source said.
“Overall, I think this will be more positive to mills in developing economies than those in the EU,” he added.
Southern European long steel mills, including Italian rebar producer Feralpi, have targeted new export markets, including the US, Canada and Israel, in order to offset a likely reduction in demand from Algeria, a key export market in recent years.
Metal Bulletin’s weekly export price assessment for Southern European rebar narrowed down week on week to €480-490 per tonne fob main ports on February 21 from €480-500 per tonne, however the price remains at high levels unseen since early 2013.
“It could be worse for us – at least we are not a part of the list of doomed countries [with higher duties] – but anything could happen depending on how the president is persuaded,” a second European producer source said.
“The uncertainty is probably positive for US mills but perhaps not for the US steel market and consumers there,” the second producer source added.
American steel users will have to face “much higher steel prices compared to the other parts of the world, which will certainly devastate many steel-using industries in the US,” the International Rebar Exporters & Producers Assn (Irepas) said late on Monday February 19.
Mills in exporting nations targeted by Section 232 have already stopped selling material into the US, one steel trader said.
“The material from long steel exporters like Turkey will have to find a new home,” one European steel trader said.
Imports of Turkish-origin rebar into the EU totalled 457,000 tonnes in 2017, up from 311,000 tonnes in 2016, according to European steel association Eurofer.
There are no anti-dumping duties currently imposed on Turkish steel exports into the EU.
“Turkish mills also have options in Asia and the Middle East where they already have existing business, but it all depends on the prices they are able to achieve,” the trader said.
Metal Bulletin last assessed the price for Turkey export rebar, on a fob main port basis, at $565-575 per tonne, an increase from $550-$560 per tonne assessed the week prior.
“Russia still sells rebar into the US so if they are stopped by high duties, it could be an opportunity for EU exporters,” he added.
The US Commerce Department previously imposed triple-digit-percentage anti-dumping duties on steel wire rod from Russia in November 2017.