The top steel executives in the U.S. called the fight against cheap steel imports a “war” in the American Iron & Steel Institute‘s annual press conference at its general meeting in Salt Lake City, Utah. The picture they painted was bleak.
Domestic steel capacity utilization averaged just 70% in 2015. It’s still only at 71.3% capacity utilization for Q1 of this year. They also said 13,000 steel jobs have been lost in the past year. All pointed the finger at global overcapacity.
“Global overcapacity has been a problem for a long time but, today, it is a crisis,” said John Ferriola, chairman, president and CEO of Nucor Corporation and the newly elected chairman of the AISI for 2016. “This overcapacity, combined with declining demand from countries like China is fueling continued high levels of dumped and subsidized imports into the U.S. market. China has subsidized the growth of its steel industry through grants, low-interest loans, free land, low-priced energy and other raw material inputs. Simply stated, the Chinese government is a company disguised as a country and they are waging economic war on the United States.”
Executives from major North American steel companies addressed the media at the general meeting of the American Iron & Steel Institute in Salt Lake City. Source: Jeff Yoders/MetalMiner.
Thomas J. Gibson, president and CEO of AISI, called upon other steel making nations to take action to eliminate global steel overcapacity. Gibson also said the U.S. government should vigorously enforce trade laws to fight against the dumping of cheaper steel products and the implementation of market-distorting policies and practices by other steel producing nations, particularly China.
China’s Still a Non-Market Economy
The executives also said that China must continue to be treated as a non-market economy for anti-dumping purposes according to the World Trade Organization. Read more
New investigations of cut-to-length steel plate from several countries were announced Friday and the Texas Supreme Court rejected a new law that, the court said, preceded the state’s authority to enforce its own air quality laws.
Steel Plate Anti-Dumping Investigation
The Commerce Department has initiated anti-dumping duty investigations of imports of carbon and alloy steel cut-to-length plate from Austria, Belgium, Brazil, China, France, Germany, Italy, Japan, South Korea, South Africa, Taiwan, and Turkey and countervailing duty Investigations of imports of carbon and alloy steel cut-to-length plate from Brazil, China, and Korea.
The petitioners are ArcelorMittal USA LLC, Nucor Corporation and SSAB Enterprises, LLC. The products covered by these investigations include carbon and alloy steel hot-rolled or forged flat plate products (not in coils), whether or not painted, varnished, or coated with plastics or other non-metallic substances (cut-to-length plate).
Texas Supreme Court Rejects Houston Air Quality Law
The Texas Supreme Court said Friday that the heart of a Houston air quality law is preempted by the state’s Clean Air Act, handing a victory to an industry group including ExxonMobil Corp. and ConocoPhillips.
Attorneys for the city of Houston argued that the city was simply trying to enforce the standards set out by the Texas Commission on Environmental Quality, a state agency, by putting in place a parallel enforcement mechanism that would impose fines on the companies even if the Commission chose not to act.
The Steel Authority of India Ltd. and JSW Steel & Essar Steel India filed a complaint with India’s Directorate General of Anti-Dumping and Allied Duties, seeking an anti-dumping investigation as well as the imposition of tariffs on steel imports from six countries. Soon thereafter, the DGAD said it had prima facie evidence of dumping of steel originating from China, Japan, Russia, Korea, Brazil and Indonesia.
Chinese Production vs. Indian Production
China is the world’s biggest steel producer, accounting for around 822 million tons a year. Driven largely by a fast track economy in the past quarter century, China’s steel output has grown by more than 12 times it’s size in the ’80s. By comparison, the EU’s output fell by 12% while U.S. output has remained flat. Of late, China has found itself in the midst of dumping controversies involving many countries it sends exports to, including the U.S., the European Union and Australia.
Chinese steel production is the target of India’s anti-dumping probe. Source: Adobe Stock/zjk.
The Indian probe’s purpose is to establish the “existence, degree and effect of dumping” by the six nations. If found to be true, it will then recommend a minimum amount of anti-dumping duties. The probe covers hot-rolled flat products of alloy or non-alloy steel in coils, as well as hot-rolled flat products of alloy or non-alloy steel not in coils. Most of these products are used in the the automotive, oil and gas line pipes/exploration, cold-rolling, pipe and tube manufacturing industries.
Trade between China and India has been growing but individually, the two are polar opposites so far as global exports are concerned. India’s exports account for just 1.7% of world trade, compared with nearly 12% for China’s. China exported 112 million metric tons of steel in 2015, which was 25% more than India’s total production of steel. India produced 92 mmt of steel in its 2014-15 fiscal year, while it imported over 9.32 mmt of steel, of which, an estimated 30% came from China.
Meanwhile, on the other side of the globe in Belgium, international steel producing countries, too, called for urgent action to curb overproduction.
A joint statement from the U.S., Canada, the E.U., Japan, Mexico, South Korea, Switzerland and Turkey, called calls for “ongoing international dialogue” to remove “market-distorting policies.”
But China rejected suggestions that it subsidized its loss-making steel companies.
India has often used anti-dumping duties and also imposed safeguard duties due to such import surges.
A few days ago, the Indian government extended the safeguard duty on steel imports until March 2018, after having first imposed them in September 2015. There will be no safeguard duties on steel imported at or above the minimum import price (MIP) stipulated by the government.
Anti-Dumping or Countervailing Duties?
Both, anti-dumping and countervailing duties try to rectify the same issue: low-priced imports. But the difference between the two is the real cause of the low price.
Anti-dumping duties are used to tackle “dumping,” a legal definition for imports whose price is lower than their production cost. An exporter sets steel prices lower than production costs and floods other markets with such steel products. If a Chinese producer spends $120 per mt to make cold-rolled steel, and then sells it in the Indian market for $90 mt, while his Indian counterparts are selling their produce for $110, then these imports are based on a predatory pricing model that is either indirectly subsidized in the originating country, or takes advantage of a lower-valued currency and production costs back home.
On the other hand, countervailing duties seek to counter low prices that are an outcome of direct subsidies. The Chinese government, like some others, offers subsidies on exports in the form of tax breaks. As a result, exporters can offer lower prices than domestic producers. Countervailing duties level the playing field by negating the advantage of direct government sponsorship by increasing import tariffs to level the playing field.
Such duties are allowed by the World Trade Organization under the General Agreement on Trade and Tariffs (GATT) but only if dumping is established. Anti-dumping duties have to be removed if the margin between the domestic price and imported price goes below 2%, or when the imports of product from a country account for less than 3% of total imports of the product.
Also, the WTO says safeguard and anti-dumping duties cannot be country specific. So, if India or the U.S. imposes duties on imports from China, the latter can also impose duties on imports from those two nations.
This is what China is now pointing out to India. A few days ago, the world’s top steel maker asked India not to resort to “trade protection measures” and to “strictly follow” WTO rules while investigating cases of dumping by Chinese iron and steel exporters. Steel overcapacity is a worldwide problem which requires a joint effort from all countries, an unnamed Chinese official was quoted as saying by the official Xinhua news agency.
China’s crude steel output hit a record high of 70.65 million metric tons in March, data showed on Friday, as a rally in steel prices and a seasonal pick-up in demand encouraged steel mills in the world’s top producer to boost production.
Steel output rose 2.9% from a year ago, beating market expectations, although total output in the first quarter was down 3.2% at 192.01 mmt, according to data from China’s National Bureau of Statistics.
The effect of illegally subsidized foreign steel, particularly from China, continued to be debated in Washington, D.C. today with domestic steel producers and scrap recyclers both testifying that more anti-dumping measures are needed to protect industries.
Steel Executives Detail Dumping Pains
Chief executives from five of the leading steel companies in the U.S. told members of the Congressional Steel Caucus today that unfair foreign trade practices have caused an increase in steel imports resulting in the loss of more than 13,000 jobs in the industry this year, and the government needs to dramatically improve policies on trade. The Steel Caucus is chaired by Tim Murphy (R-PA) and vice-chaired by Rep. Pete Visclosky (D-IN).
As members of the American Iron and Steel Institute, Mario Longhi, President and CEO of U.S. Steel Corporation; Chad Utermark, Executive Vice President of Nucor Corporation; Jim Baske, CEO of ArcelorMittal North America; Chuck Schmitt, President, of SSAB Americas and Chairman of AISI; and, Roger Newport, CEO of AK Steel Corporation, testified before the more than two dozen members of Congress. The target of much of their discussion was China, its steel overproduction and its attempt to have market economy status granted to it by the World Trade Organization.
“From outright government ownership to a vast array of illegal subsidies, many foreign steel companies are shielded from the realities of the market,” Utermark said. “China is the prime example. Basically, the Chinese government is a company disguised as a country engaged in economic warfare. It is the major contributor to the capacity glut. China’s economic slowdown, coupled with its estimated 425 million tons of excess capacity, has resulted in China flooding the global market with steel exports. This market-distorting behavior is creating real harm for American steelworkers.”
Scrap Recyclers Want Protection, Too
Institute of Scrap Recycling Industries Chief Economist Joe Pickard also testified recently at a U.S. Trade Representative/U.S. Department of Commerce hearing.
“Recycled iron and steel products, also known as ferrous scrap, is by far the largest recycled commodity group processed by our industry, with scrap recyclers — who are located in every congressional district – typically processing between 70-75 million tons of ferrous scrap annually,” Pickard said.
“According to U.S. Geological Survey estimates, the total value of ferrous scrap processed in the U.S. in 2014 was $26.1 billion, but for 2015 USGS reports that figure declined to $18.3 billion as scrap prices and volumes declined due to a range of domestic and global market factors,” Pickard testified. “Many factors, including the surge in Chinese steel production to more than 800 million tons annually has resulted in some of the most difficult market conditions faced by scrap recyclers and the steel industry in a decade.”
The most recent case involves the Chinese producers Wuhan Iron & Steel and Baoshan Iron & Steel who brought an anti-dumping action against Japanese and Korean producers of grain-oriented electrical steel. Provisional duties of 45.7% to Nippon Steel & Sumitomo Metal, 39% to JFE Steel and 14.5% to POSCO with final duties to be determined during Q3 of this year, according to a recent TEX Report.
The industry knows, however, that only the three mills named in that case can provide the high-grade materials needed to produce transformers that meet higher efficiency standards imposed by governments the world over, including China.
For sure, the domestic Chinese producers will likely reap a small bump in prices but their customers, the global transformer and power equipment producers, will make adjustments as required, as well. Read more
Steel imports are up and China may soon send a shock to copper markets by selling its stockpiles of the red metal.
China Could Send Shock to Copper Markets
China may be about to shock the global copper market by unleashing some of its stockpiles of the metal, which are near record highs according to sources inside the secretive government warehouses, onto the global market.
Four traders of copper, including two from state-owned Chinese smelters, said they expect China to raise its copper exports — which are usually tiny — in the next few months. China’s refined copper exports averaged less than 10,000 metric tons a month in the first two months of 2016, and around 17,000 a month in 2015.
Market watchers are concerned that such a supply shock could stunt or even reverse recent price gains the red metal has made.
Steel Imports Up in March
Based on the Commerce Department’s most recent Steel Import Monitoring and Analysis (SIMA) data, the American Iron and Steel Institute reported today that steel import permit applications for the month of March total 2,969,000 net tons.
This was a 23% increase from the 2,414,000 permit tons recorded in February and a 30% increase from the February final imports total of 2,276,000 nt. Import permit tonnage for finished steel in March was 2,120,000, up 1% from the final imports total of 2,099,000 in February. For the first three months of 2016 (including March SIMA and February final), total and finished steel imports were 7,894,000 nt and 6,448,000 nt, respectively, each down 33% from the same period in 2015. The estimated finished steel import market share in March was 24% and is 25% 0on the year-to-date.
Finished steel imports with large increases in March permits vs. the February final included standard rails (up 387%), cut lengths plates (up 62%), sheets and strip all other metallic coatings (up 19%), heavy structural shapes (up 16%) and wire drawn (up 11%).
The U.S. International Trade Commission made a unanimous preliminary determination on March 25 that unfairly-traded imports of stainless steel sheet and strip are causing injury to U.S. stainless producers. The petitioners were AK Steel, ATI’s Flat Rolled Products Division, North American Stainless and Outokumpu Coil Americas.
The ruling was no surprise as the cold-rolled stainless steel anti-dumping and countervailing duties petition is one of many petitions being filed against Chinese products in recent months. What is surprising is that cut sheet has been included in the petition. The last cold-rolled stainless anti-dumping action filed in 1998 included only products in coil form.
The petitioners need to supply at least 25% of the U.S. market to claim injury. Only NAS and Outokumpu have cut-to-length lines, so it is impossible for the mills to have significant market share in cut sheets. Service centers process the lion’s share of cut sheets for the U.S. market. Unless the service centers are willing to be a party to the petition, I think cut sheets should be removed from it.
Non-coil stainless is included in a new anti-dumping petition. Source Adobe Stock/Jovanning.
Since the cold-rolled stainless petition was filed earlier this year, Chinese mills have been canceling open orders with U.S. customers. No new offers are being made to the U.S. market. Domestic lead times for cold-rolled stainless steel are now well beyond eight weeks, with some products at over 12 weeks. Steel mills are in “controlled order entry” mode for Q2 in order to ensure volume for their key customers. Read more
Using Chicago as an example, the change in freight equalization rates means that service centers and large end users will be paying for the freight for 72-inch wide on Outokumpu Coil Americas‘ Calvert, Ala., mill’s almost 900 miles compared to around 300 miles from Ghent, Ky., where North American Stainless is located. For the metal buyer, the only other options for 72-inch-wide continuous mill plate and cold-rolled stainless are TISCO, Aperam and Outokumpu’s European facilities.
TISCO will not be a factor in cold-rolled 72-inch-wide due to the anti-dumping and countervailing duty actions that the U.S. mills filed earlier this year. Unless you buy for facilities on the East Coast near a port, this new freight policy should remain intact. On another note, Outokumpu should consider its premium on 72-inch-wide. I wrote in a previous posting that the U.S. domestic market for 72-inch-wide wide could grow if the premium over 60-inch-wide was dropped. Perhaps Outokumpu should consider optimizing its 72-inch cold-rolling mill by increasing the production of 72-inch-wide.
Bright-annealed, 48-inch-wide products now are equalized based on an 1,800 mile trip from San Luis Potosi as opposed to the 400 miles of Allegheny Technologies’ Louisville, Ohio, facility where ATI produces its bright-annealed. Read more
Today, U.K. politicians are somewhat belatedly calling for requirements that national infrastructure projects use U.K. steel. Meanwhile, Tata Steel and Thyssenkrupp are said to be eying a merger.
U.K. Politicians Clamor to Protect Steel Industry
U.K. Leaders said on Sunday that U.K. steel producers must be considered for infrastructure and other government contracts involving steel supplies, as part of plans to find a long-term solution to a crisis in the industry. The government is looking for ways to support domestic steel producers after India’s Tata Steel put its loss-making British plant up for sale on Wednesday, putting thousands of jobs at risk.
Speaking of which, Tata Steel and Germany’s Thyssenkrupphave been talking about combining their European steel operations, a person aware of the talks said on Friday. The source, who did not want to be named because he is not authorized to speak publicly, said talks had been ongoing for about a year but declined to comment on their current status.