Vietnam re-rollers warn of steel supply glut in Asia due to fresh US tariffs

Vietnamese re-rollers are fretting over a 25% import tariff that the United States is set to impose on steel imports, expecting them to reduce the volumes of finished flat products that they can ship there, market sources told Metal Bulletin on Friday March 2.

This could in turn result in a supply glut of flat steel in Asia, they warned.

“Vietnamese re-rollers are growing increasingly worried and thinking about what to do once the 25% tariff is imposed because this could mean the loss of a major market for them,” a Vietnamese re-roller source said.

The top three steel exports from Vietnam to the US are cold-rolled coil, hot-dipped galvanized coil and other metallic-coated coil, according to data from the US Department of Commerce’s enforcement & compliance division.

Export volumes have grown continually in the past five years, increasing especially strongly between 2015 and 2017.

CRC exports increased from 33,199 tonnes in 2015 to 155,619 tonnes in 2017, while HDG shipments increased from 292 tonnes in 2014 to 124,799 tonnes in 2017.

Other metallic-coated flat steel exports increased from 181 tonnes in 2013 to 130,440 tonnes in 2017.

US President Donald Trump said on Thursday that the US would impose an import tariff of 25% on steel imports and that it would “remain for a long time” to protect its domestic steel industry from cheap steel from around the world.

The move follows recommendations made by the Department of Commerce to impose tariffs of 24-53% on steel imports following a Section 232 probe into whether steel imports posed a national security risk to the US.

Asia is expected to face a renewed glut of flat steel if US demand truly drops off, especially if Vietnamese demand for Asia-origin substrate falls.

“Once Vietnam reduces its spot demand for HRC, there will be surplus HRC that needs to find sales outlets elsewhere in Asia,” an industry source with close knowledge of the re-rolling market said.

“This would mean more Chinese, South Korean and Japanese HRC being offered by mills and traders, which would exert pressure on prices,” he said.

However, this is also a boon for re-rollers, because premiums for high-quality HRC from Japan and South Korea over lower-quality grades would drop in response to an increase in spot supply.

Japan and South Korea-origin SAE1006 HRC typically commands premiums of about $30-50 per tonne over Chinese and Indian products. Buyers are sometimes willing to fork out extra for if they wish to purchase higher-quality materials.

Market sources in Japan and South Korea have also raised concerns about how the new US tariffs would affect steel exports from those countries.