Ferrous Metals

President Donald J. Trump has completed his first 100 days in office and thus far has signed into law 28 pieces of legislation.

While Trump has made traction in some respects, the fate of the nation’s steel industry was still up in the air — that is, until Trump signed a Presidential Memorandum in late April calling on Department of Commerce Secretary Wilbur Ross to prioritize an investigation into the effects of steel imports on U.S. national security.

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Here are three things you should know about this directive and what it could mean for the nation’s steel industry.

The Trade Expansion Act of 1962

The investigation is being conducted under Section 232 of the Trade Expansion Act of 1962. According to the Department of Commerce, Ross is tasked with determining the following:

  • “Whether steel imports cause American workers to lose jobs needed to meet security requirements of the domestic steel industry;
  • Any negative effects of steel imports on government revenue; and
  • Any harm steel imports cause to the economic welfare of the U.S.”

The Current Situation

Despite an existing steel industry, steel imports saw a 19.6% year-over-year increase in February, and, currently, imported steel accounts for 26% of the U.S. market share, according to the Department of Commerce.

Further, the U.S. steel industry is only operating at 71% capacity, and jobs in the industry has continued to take a steady hit. Read more

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.

This month, some of our metals reached new heights while others saw their rallies noticeably falter.

Aluminum and Raw Steels are still riding high, while complicated supply stories saw stainless and copper fall. Demand from manufacturers for almost all of the metals we track remains strong.

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17 Of the 18 manufacturing industries tracked by the Institute for Supply Management’s index of national factory activity reported growth and no industry reported a contraction last month. Buyers still might want to beware as metal markets are showing more pull-backs than we witnessed in March, despite the overall bullish behavior across the entire industrial metals complex.

Global steel prices tend to find a floor based on the price of Chinese steel. If Chinese prices fall, domestic U.S. prices also tend to fall. However, grain-oriented electrical steel continues to beat to its own drum, often not aligned with underlying steel prices.

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March is no exception.

Although U.S. domestic steel prices continued to rise in March, the GOES M3 price fell and fell rather significantly dropping by nearly 7%.

GOES MMI

Meanwhile, according to a couple of recent TEX Reports, GOES prices from Baosteel increased by $38/metric ton in April after increases of $168/mt from January through March. Baosteel acts as the price leader and according to a recent report, and will likely stand pat until or unless others also increase their prices. Those “others” may have a near-term opportunity to do so as a large tender from Bharat Heavy Electricals for 20,000 mt will bring in the global GOES producer community. As China tends to set the “market floor” for global steel prices, the TEX Report suggests that this tender will serve as the global price floor for GOES for the balance of 2017.

Supporting the rising price theory, TEX Report also suggests that prices have risen by $200-300 per mt in the Middle East and India.

Ironically, prices for steel rebar on the Shanghai Futures Exchange have declined by 5% according to a recent MetalMiner story on the back of declining coking coal (4%) and declining coke prices (5%), as well as falling iron ore futures. Some, including MetalMiner, believe the price declines are due to speculators unwinding bullish bets.

Chinese HRC

Source: MetalMiner Forecasting

Regardless, Chinese prices for hot-rolled coil are falling and though GOES prices often diverge from underlying steel market trends, upward price movements may be elusive.

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Last week, the Trump trade agenda finally took off as the Commerce Department, now officially led by billionaire Wilbur Ross, finalized new carbon and alloy steel plate anti-dumping duties and President Donald Trump had some choice words as he signed two new executive orders he says will level the international trade playing field for U.S. manufacturers.

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“There’s never been a systematic examination, country by country and major product by major product, of why do we have the deficit,” Ross said during an interview on “Sunday Morning Futures” on Fox News with Sandra Smith, who was sitting in for host Maria Bartiromo.

“There’s a lot that’s due to cheating, there’s a lot due to dumping, there’s a lot that’s due to subsidies that are illegal, lot to do with a lot of things that are not inherent in free trade,” he continued.

Ross cited entities, many of which were created purely to facilitate exports, that go out of business before duties are collected as one situation that leads to lax enforcement of existing anti-dumping and countervailing duties orders, what the other executive order instructed commerce to accomplish.

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The new executive orders come just as President Trump will meet this week with Chinese President Xi Jinging at Trump’s Mar-a-Lago resort in Florida. It’ll be Trump’s first face-to-face meeting with Xi, after a campaign that was highly critical of U.S. trade with China.

Carbon and Alloy Steel Plate Duties

Commerce had a busy week, announcing affirmative final determinations that steel producers in Austria, Belgium, France, Germany, Italy, Japan, the Republic of Korea (South Korea), and Taiwan are dumping imports of carbon and alloy steel plate in the U.S.

The Department of Commerce today announced its affirmative final determinations that steel producers in Austria, Belgium, France, Germany, Italy, Japan, the Republic of Korea (South Korea), and Taiwan are dumping imports of carbon and alloy steel plate in the U.S.

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Margins in the dumping investigations ranged from 3.62% to 148.02%, and were, in certain instances, based on adverse findings against non-cooperative responding parties. Commerce also determined that critical circumstances exist in three investigations, allowing for collection of duties for a retroactive period of 90 days before the preliminary determination, spanning back to August 16. Commerce also found that South Korea is providing unfair subsidies to its producers of steel plate at a countervailable duty rate of 4.31%. As a result of these final affirmative determinations, Commerce will instruct Customs and Border Protection to collect cash deposits based on these final rates. Read more

I had the pleasure of attending the S&P Global Platts Steel Markets North America conference held recently in Chicago.

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The general outlook at the conference for steel markets in the year ahead was notably optimistic, although each of the initial speakers differed in who and/or what the audience should pay attention to in the coming months and years.

Conference keynote speaker, Herb Black, CEO of American Iron & Metal Company had his eyes on Turkey and its burgeoning scrap market. Timna Tanners, Managing Director of U.S. Metals and Mining at Bank of America Merrill Lynch, encouraged the audience to focus on China, while Beth Ann Bovino, Chief U.S. Economist for S&P Global Ratings, spoke to present macroeconomic conditions with a watchful eye on the current administration and potential post-election policy changes. Read more

This part two of our sit down with Steel Manufacturers Association President Philip K. Bell at the recent S&P Global Platts Steel Markets North America conference here in Chicago. Bell currently serves on the Department of Commerce International Trade Advisory Committee on Steel (ITAC 12), advising the Secretary of Commerce and United States Trade Representative on trade policy, trade agreements, and other trade related matters that benefit U.S. businesses, workers, and the economy.

Jeff Yoders: You mentioned that the proposed border-adjustment tax is something you have to be very, very careful about.

Philip K. Bell: Ironically, when I look at things the administration should prioritize, I would really like to see infrastructure rise higher on that top five list as opposed to things like a healthcare repeal because that’s one clear way that you can jump start the steel industry.

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Philip K. Bell

Philip K. Bell. Source: SMA

The steel industry, to me, if you look at it in the simplest terms, is based on cost and demand. You can help lower steel producers’ costs by reducing taxes and regulatory burdens, but you can increase demand by having this $1 trillion infrastructure plan and that would be very important. Making sure you deal with countries that dump, subsidize exports, etc. would also help.

JY: Using countervailing duties, anti-dumping duties and the existing tools commerce has, right?

PB: Right.

JY: I asked Chad Utermark, executive vice president of Nucor, what, exactly, their representatives had heard about when we might get to see the ideas for an infrastructure bill precisely because of that. This seems like a slam dunk for economic growth for all the industries that support construction. Why isn’t it being pushed more?

PB: We certainly would like to see infrastructure investment made a higher priority. I love the idea of public-private partnerships. The P3 approach is good, you’re going to bring better managerial skill with people who can manage the entire supply chain of infrastructure investment. Keep in mind, infrastructure can be financed this way, but it also needs to be funded (to an extent by the government). There are some infrastructure projects that are very important but might not appeal to private investors. They might not be easy to get done. Read more

In the ongoing dispute between Japan and India over cheap steel imports, Japan has requested that the World Trade Organization set up a panel to resolve the dispute.

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Early indications are that the move will be opposed by India. Japan’s request comes 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.”

New Delhi would have taken recourse to the safeguard measures on grounds that the import surge in hot-rolled flat products is the result of unforeseen developments. India levied 20% safeguard duties ad valorem minus anti-dumping duties on Japanese imports of hot-rolled flat products between September 2015 and September 2016; 18% between September 2016 and March 2017; 15% between March 2017 and to expire by September 2017; and 10% for a future period in September 2017 and March 2018.

As reported by MetalMiner, despite the excellent trade relations between the two nations, Japan is unhappy with India’s decisions to place a minimum import price and other assorted duties to protect its domestic steel industry. Japan claims this has halved its steel exports to India in the last year.

Japan requested the panel came after India’s failure to provide “convincing reasons” for its safeguard and anti-dumping actions. It’s said the request will come up before the dispute settlement body (DSB) meeting today.

According to a report in the Financial Express, India opposes Japan’s move. Quoting experts, the report said since WTO cases can be settled with rulings that were “prospective,” any adverse judgment would not affect India significantly.

In a parallel development, there are reports coming in that India would use make it compulsory for Indian customers to use domestically produced steel, to stop inroads made by steel products from other countries including China.

India may soon mandate the use of local steel in government infrastructure projects worth billions of dollars, pitching it as a WTO-compliant protectionist measure.

Quoting news agency Reuters, the report said the Indian Government expects to move to boost sales of local companies such as JSW Steel and Tata Steel and eventually attract global steelmakers such as ArcelorMittal and POSCO to invest in the country.

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India is the world’s third-largest steel consumer, but its current level of capacity utilization by domestic steel producers is below 80%.