Articles in Category: Anti-Dumping

This week, President Donald Trump and the Department of Commerce used executive orders, new anti-dumping investigations, memoranda invoking national security concerns and other executive branch tools to get tough on foreign steel imports.

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Although Trump or Commerce Secretary Wilbur Ross never overtly stated it, the target is clearly China and the global steel overcapacity that it’s the main culprit in creating. China’s steel exports hit a record 112.4 million metric tons in 2015, then dropped slightly to 108.49 mmt last year, as Chinese mills have been chastened by threats of a trade dispute.

Fre trade

The Trump administration is using every tool in the box on steel overcapacity. Source: Adobe Stock/Argus.

To date, the Global Forum on Steel Overcapacity hasn’t caused overcapacity to come down very much. Can a section 232 investigation or other U.S.-only actions change that? The U.S. steel industry certainly seems to think so. Or it’s at least saying, “why not try?”

Steelmaker executives such as U.S. Steel CEO Mario Longhi and SSAB Americas President Chuck Schmitt flanked Trump and Ross at the memorandum-signing ceremony calling for the Section 232 investigation yesterday. The praise was universal from steel producers as one might expect, too. Still, Trump’s latest salvo on trade will renew concerns that China may retaliate.

China’s Foreign Ministry spokesman Lu Kang said today the country needed to ascertain the direction of any U.S. investigation before it could make a judgment. There’s also the fact that Trump now claims that he and Chinese President Xi Jinping are the best of friends.

Chinese steel executives also repeated their mantra that overcapacity is not just China’s problem and it needs global coordination to resolve it, but also said it would be tough to rein in the sector.

“The Chinese government will not set export limits for the steel mills and could not keep track of every mill,” Li Xinchuang, vice chairman of the China Iron and Steel Association, told Reuters.

What may be more effective is rising steel prices in China and what looks more and more like a very real crackdown on pollution and dirty air in China. An early-year surge in Chinese steel prices has lifted the prices of its export products and China has lost its competitiveness with other markets. With coking coal prices increasing, Chinese steel prices could increase even more, which our Lead Forecasting Analyst, Raul de Frutos, pointed out this week.

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On a personal note, this will be my last MetalMiner week-in-review. I have thoroughly enjoyed informing all of you wonderful readers and site users about the latest developments in metals markets these last three years. Thank you for taking advantage of our services. It has been an honor.

 

UPDATED 11:47 AM with Comments from President Trump, Commerce Secretary Wilbur Ross and the American Iron & Steel Institute.

President Donald Trump will sign a directive asking for a speedy probe into whether imports of foreign-made steel are hurting U.S. national security, two administration officials told Reuters on Wednesday.

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Trump signed the memorandum related to section 232 of the Trade Expansion Act of 1962 at the White House with leaders of some domestic steel companies, such as U.S. Steel‘s CEO Mario Longhi and SSAB Americas President Chuck Schmitt in attendance. The law allows the president to impose restrictions on imports for reasons of national security. The order would only task the Commerce Department with starting a probe into the imports and if they, indeed, harm national security. Reuters reported that Commerce Secretary Wilbur Ross has already tasked Commerce personnel with starting the probe.

Trump said Ross and Commerce would be back “very, very soon” with recommendations about how to protect the American steel industry. He also repeated campaign trail criticism of the North American Free Trade Agreement and said that farmers in Wisconsin are also suffering from cheap imports of dairy products from Canada.

“Times of crisis call for extraordinary measures. Massive global steel overcapacity has resulted in record levels of dumped and subsidized foreign steel coming into the U.S. and the loss of nearly 14,000 steel jobs,” said Thomas J. Gibson, president and CEO of the American Iron & Steel Institute, the largest trade organization of North American steel producers. “The Administration launching this investigation is an impactful way to help address the serious threat posed by these unfair foreign trade practices, and we applaud this bold action.”

According to Ross, the investigation was “self-initiated” by Commerce and will consider “the domestic production (of steel) needed for the projected national defense requirement” and if domestic industries can meet that requirement. It will also look at “the impact of foreign competition on specific domestic industries and the impact of displacement of domestic product because of foreign imports.”

There are national security implications from imports of steel alloys that are used in products such as the armor plating of ships and require a lot of expertise to create and produce.

The Department of Commerce started investigations of imports of carbon and alloy steel wire rod from Belarus, Italy, South Korea, Russia, South Africa, Spain, Turkey, Ukraine, the United Arab Emirates, and the United Kingdom, and companion countervailing duty investigations of imports of carbon and alloy steel wire rod from Italy and Turkey. The investigations cover hot-rolled products of carbon and alloy steel.

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The alleged dumping margins range from 18.89% (Italy) to 756.93% (Russia) and both of the alleged countervailing subsidies are above de minimis (less than 2%). The U.S. International Trade Commission is scheduled to make its preliminary injury determinations on or before May 12, 2017.

The petitioners are Gerdau Ameristeel US Inc. in Florida, Nucor Corporation based in North Carolina, Keystone Consolidated Industries of Texas, and Charter Steel in Wisconsin.

President Donald Trump (R-N.Y.) is set to sign an executive order this afternoon ordering enforcement and review of the H-1B visa program, popular in the technology industry, on a visit to the headquarters of Snap-On Inc., a tool manufacturer in Kenosha, Wis., according to senior administration officials.

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He will also use what the White House called the “Buy American and Hire American” order to seek changes in government procurement that would boost purchases of American products in federal contracts, with one aim being to help U.S. steelmakers.

The moves show Trump once again using his power to issue executive orders to try to fulfill promises he made last year in his election campaign, in this case to reform U.S. immigration policies and encourage purchases of American products.

“Strong Buy America domestic procurement preferences for federally funded infrastructure projects are vital to the health of the domestic steel industry, and have helped create manufacturing jobs and build American infrastructure,” said Thomas J. Gibson, president and CEO of the American Iron and Steel Institute, the largest trade group for North American steel manufacturers. “The foundation of a strong Buy America program is the longstanding requirement that all iron and steel-making processes occur in the U.S. for a product to be Buy America compliant — from the actual steel production to the finishing processes. This ‘melted and poured’ standard has been successfully applied since 1983 and must continue to be the standard used in federal Buy America rules for steel procurement. We applaud President Trump for affirming his commitment to full and effective enforcement of our Buy America laws, and to addressing the issue of unfairly dumped and subsidized steel, in signing this Executive Order today.”

As requested by Japan, the World Trade Organization (WTO) has set up a dispute settlement panel to decide the row over India’s imposition of a safeguard duty on imports of iron and steel products.

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MetalMiner has reported on this case in the past. Japan’s request was made after New Delhi imposed safeguard duties on several iron and steel products, which India claimed violated global trade rules.

India’s finance ministry imposed definitive safeguard duties on imports of hot-rolled flat products of non-alloy steel in coils to counter a surge in imports from several countries, including Japan. India’s stand has been that such cheap imports “caused injury to domestic steel industries.”

As both the nations failed to arrive at a solution, Japan petitioned the WTO for the formation of a dispute resolution panel.

Soon after the WTO announcement, though, India objected to Japan’s WTO request for a “prompt’’ resolution of its dispute against India’s duties on steel imports.

India’s contention is that there’s “no rationale” for treating the dispute any more urgently than other WTO disputes it’s involved in and the same standard should be applied to all disputes.

In December, Japan dragged India to the WTO against measures taken on imports of iron and steel products. Incidentally, Japan is the second-largest steel producer in the world.

The dispute assumes some amount of significance as both India and Japan signed a comprehensive free trade agreement, meant to avoid this type of arbitration, in 2011.

This was Japan’s second attempt to ask the WTO to set up a panel after the first was blocked by India in March. India expressed disappointment over Japan’s insistence on the WTO panel despite its “sincere efforts” to resolve the matter in a bilateral manner.

It normally takes about 20 months to settle a dispute at the WTO, but according to WTO rules, in cases of urgency, the parties to the dispute, panels and the Appellate Body make every effort to accelerate the proceedings.

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The Japanese government reportedly estimated that the tariffs could cost Japanese steel companies about $220 million through March 2018.

The safeguard duties imposed by India also gave rise to complaints from other WTO members.

Secretary of Commerce Wilbur Ross recently announced the final results of an annual administrative review of the anti-dumping duty order on imports of oil country tubular goods (OCTG) from the Republic of Korea (South Korea). Commerce found that Korean steel producers have been unfairly dumping OCTG in the U.S. market, hurting American workers and businesses.

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Commerce announced, in a press release, that it is exercising its authority under Congress for the first time to address market distortions in the production of foreign merchandise, and to calculate dumping margins that “more accurately account for the unfair pricing practices of foreign exporters. Section 504 of the Trade Preferences Extension of 2015 is a vital instrument in helping to identify distortions in the market that can enable and facilitate dumping practices.”

During the period covered by the administrative review (July 2014 to August 2015), OCTG imports from South Korea were valued at an estimated $1.1 billion, accounting for nearly 25% of all U.S. imports of OCTG. The dumping margins, or the rate at which the imported materials were under sold below fair value in the U.S., were found to range from 2.76% to 24.9%.

A 24.92%t tariff rate was imposed on OCTG from Nexteel, 2.76% on SeAh Steel and 13.84% on Hyundai Steel and other South Korean steelmakers.

The review also concluded that prices of the hot-rolled coil used to produce OCTG, as well as Korean electricity prices, were distorted. Anti-dumping tariffs on Nexteel and Hyundai each increased 16.88% and 7.92%, respectively, during this review. The initial preliminary rulings and the lower percentages were announced last October.

Seah Steel, however, saw a 1.04% reduction, making it the only South Korean steelmaker that was levied a lower tariff rate.

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“There is fair and unfair trade, and the distinction is not very hard to make,” Secretary Ross said in the release. “We will not stand for the distortions in foreign markets being used against U.S. businesses. The Trump Administration will continue to employ all of the tools provided under the law to take swift action against harmful trade practices from foreign nations attempting to take advantage of our markets, workers, and businesses.”

China will offer the Trump administration better market access for financial sector investments and U.S. beef exports to help avert a trade war, the Financial Times reported on Sunday, citing officials familiar with the matter.

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China is prepared to raise the investment ceiling in the Bilateral Investment treaty and is also willing to end the ban on U.S. beef imports, the newspaper also reported.

Commerce Secretary Wilbur Ross said on Friday that President Donald Trump and Chinese President Xi Jinping have agreed to a new 100-day plan for trade talks on Friday.

Steel Shipments Down in February, But Up Year-Over-Year

The American Iron and Steel Institute recently said that for the month of February 2017, U.S. steel mills shipped 7,232,341 net tons, a 6.2% decrease from the 7,708,416 nt shipped in the previous month, and a 2.4% increase from the 7,059,442 nt shipped in February 2016. Shipments year-to-date in 2017 are 14,940,757 nt, a 6% increase vs. 2016 shipments of 14,090,749 nt for two months.

A comparison of February shipments to the previous month of January shows the following changes:  hot rolled sheets, down 3%, hot-dipped galvanized sheets and strip, down 6% and cold-rolled sheets, down 8%.

The signals the U.S. is sending in the steel sector really worry Germany, so said Brigitte Zypries, German Economy Minister, according to Reuters in a recent article.

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This isn’t the first time the European Union has had a trade spat with the U.S. over steel but it is unusual for one party or the other to take the case to the World Trade Organization, claiming “accounting tricks” and “protectionism” designed to give domestic producers an “unfair competitive advantage.”

The E.U.’s position is this issue should have been addressed through bilateral negotiations giving them the opportunity to show Germany, French and Austrian steel producers are not dumping steel and are not being subsidized, but President Trump signed executive orders last Friday aimed at identifying abuses causing the huge U.S. trade deficit, and Germany is deemed one of the worst culprits.

Port Talbot steel plant

British Steel and its Port Talbot plant could be the next company in line for carbon and alloy steel plate tariffs from the U.S. Source: Adobe Stock/Petert2

However, by issuing a final finding that European and Asian producers dumped certain carbon and alloy steel cut-to-length plate in the U.S. market, the Department of Commerce says it is allowed to impose duties ranging from 3.62 to 148%, but the E.U. claims the decision has been determined on the basis of dodgy accounting estimates and the correct place to discuss them is at the negotiating table or via the WTO, not by applying duties which will then take months to address and impact trade for a year or more, essentially shutting European mills out of the U.S. market. Read more

A recent Financial Times article lays the blame for falling iron ore prices in China firmly at the door of Australia’s Department of Industry Innovation and Science, whose latest quarterly report predicted average prices in China would fall to $65 per metric ton this year before ultimately declining further to $51 per mt.

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The FT quoted the department’s report saying prices would be weighed down by the combined impact of ongoing growth in low-cost supply and soft demand.

Source: Financial Times

While we don’t doubt that investors will have taken notice of the department’s report, the fact is analysts have been calling for a fall in the iron ore price for months now. Indeed, the rising tide of supply has been expected to weigh on prices for much of the last six months, such that continued price resilience and robust demand have caught some by surprise. Read more

Dean A. Pinkert is a partner in Hughes Hubbard’s International Trade practice. He is a former Commissioner of the U.S. International Trade Commission. Pinkert was nominated by President Bush and confirmed by the Senate in 2007, and was designated Vice Chairman by President Obama in 2014.

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As a commissioner, Pinkert participated in numerous anti-dumping, countervailing duty, and safeguard investigations, including the special safeguard investigation of passenger tires that resulted in import relief for the domestic tire industry and was upheld by the World Trade Organization. He participated in an unprecedented number of final determinations in Section 337 investigations during his tenure, notably dissenting in an electronic devices case that went to President for policy review. President Obama, relying on many of the factors cited in the dissent, overruled the commission for the first time since 1987.

Dean Pinkert

Former ITC Vice Chair A. Dean Pinkert. Source: Hughes Hubbard.

Pinkert spoke with MetalMiner Editor Jeff Yoders by phone about several issues facing metals producers and manufacturers, including global steel and aluminum overcapacity and how the new Trump administration can approach trade and overcapacity issues. This is part two of our discussion, which focuses on cases that rise to the WTO. See part one here if you missed it.

Jeff Yoders: Is there a risk to elevating any such case to the WTO of essentially spending the money and hiring the lawyers, only to lose the case?

Dean Pinkert: First, there are two types of cases. When there’s a decision by the U.S. Trade Representative‘s office to file a case with the WTO, we’ll call those offensive cases. They are filing a complaint with the WTO saying that another country is violating its trade commitments. By the way, I think the Obama administration was very aggressive at developing and filing cases of that kind.

There is  another type, and these are what I was referring to earlier, where the U.S. has an investigation of something, concludes that a trade remedy is appropriate, imposes that trade remedy and then gets sued and it goes to the WTO. In 2002, when the steel safeguard relief was put into place, the U.S. was taken to the WTO by our trading partners and, ultimately, the WTO ruled against the safeguard. It was then withdrawn, although the Bush administration said the reason it was withdrawn was because it achieved its aim of giving the domestic industry some breathing space so that they could regain profitability, not because of the loss.

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I was talking more about that more defensive posture in the WTO when I was talking about safeguards.

JY: There’s a lot of talk about a border-adjustment tax right now. Many policy papers are calling the scheme very similar to a value-added tax but only on companies. Is there a chance that such an idea might run afoul of WTO rules?

DP: We don’t now exactly what it would look like or what the final measure, if there is one, would be. We don’t know how the WTO would react to it, either, but it’s possible that the WTO would consider it an export subsidy and, if it did, then that would have some serious consequences because there is a list of various kinds of subsidies, particularly export subsidies, in the WTO agreement. If it was found to be an export subsidy there would be considerable consequences for the U.S.

But, it’s important to note that we don’t even know what the border adjustment tax will look like yet. We would have to see. Read more