South Korea

The statistics on steel imports to India speak for themselves.

Steel imports went up 72% in the last fiscal year to 9.3 million metric tons, of which South Korea and Japan together sent 3.5 mmt. They’re still going up. In the first two months of this fiscal year, the situation got worse, with shipments from Japan at 111% and from South Korea 51%.

This September: SMU Steel Summit 2015

Fitch Ratings, for example, in a recent report, said it, too, did not expect the Indian government’s recent tariffs on the two free trade agreement partners to increase customs duties on steel imports would alleviate the pressure on Indian steel producers. The higher customs duties will likely result in only a marginal increase in the landed costs of imported steel products.


What Indian steel companies are hoping is that, just like in the US, the Indian government starts thinking of imposing anti-dumping and safeguard measures. Contrary to their expectations, the government is said to be actively toying with the idea of signing a free trade agreement with the Philippines. It also extended a previous deal to supply high-grade ore to Japan and Korea. Read more

The Commerce Department determined that imports of steel nails from South Korea, Malaysia, Oman, Taiwan, and Vietnam have been sold in the US at dumping margins ranging from up to 11.80% for South Korea, 2.61% to 39.35% for Malaysia 9.10% for Oman, up to 2.24% for Taiwan, and a whopping 323.99% in Vietnam.

Pool 4 Tool’s Automotive SRM Summit

The imports of steel nails from Korea, Malaysia, Oman, and Taiwan received “de minimis” countervailable subsidies resulting in final negative determinations that apply to those countries, respectively. Commerce determined that imports of steel nails from Vietnam received countervailable subsidies ranging from 288.56% to 313.97%.

South Korea

In the South Korea anti-dumping investigation, Commerce found that mandatory respondent Jinheung Steel Corporation and its affiliates Jinsco International Corporation and Duo-Fast Korea Co. Ltd., had not sold steel nails into the US at less than fair value. Mandatory respondent Daejin Steel received a final dumping margin of 11.80%. All other producers/exporters in South Korea received a dumping margin of 11.80%.


In the Vietnam anti-dumping investigation, mandatory respondents Region Industries Co., Ltd., and its affiliated exporter Region International Co., Ltd., and United Nail Products Co., Ltd. failed to respond to Commerce’s request for information and were deemed to be part of the Vietnam-wide entity. Accordingly, they received a final dumping margin of 323.99%. Separate rate applicant Kosteel Vina Limited Company received a final dumping margin of 323.99%. All other producers/exporters were deemed to be part of the Vietnam-wide entity and received the Vietnam-wide margin of 323.99%.

Read more

The Department of Commerce is investigating antidumping duty and countervailing duty investigations of imports of welded oil and gas line pipe from South Korea and Turkey.

FREE Download: The Monthly MMI® Report – covering Steel/Iron Ore markets.

Circular welded carbon and alloy steel (other than stainless steel) pipe used for oil or gas pipelines is the focus of the investigation. Welded line pipe is normally produced to the American Petroleum Institute (API) specification 5L, but can be produced to comparable foreign specifications, to proprietary grades, or can be non-graded material. All pipe meeting the physical description, including multiple-stenciled pipe with an API or comparable foreign specification line pipe stencil, is covered by the scope of these investigations.

The petitioners are American Cast Iron Pipe Company (Birmingham, AL); Energex, a division of JMC Steel Group (Chicago, IL); Maverick Tube Corporation (Houston, TX); Northwest Pipe Company (Vancouver, WA); Stupp Corporation, a division of Stupp Bros., Inc. (Baton Rouge, LA); Tex-Tube Corporation (Houston, TX); TMK IPSCO (Houston, TX); and Welspun Tubular LLC USA (Little Rock, AR).

In 2013, imports of welded line pipe from South Korea and Turkey were valued at an estimated $554.1 million and $46.7 million. Dumping rates for South Korea could potentially be 48 to 202% and up to 9.85% for Turkey. The US International Trade Commission will make a decision by December 1.

Cheap steel products have been flowing into the United States from China, South Korea, India and elsewhere, making it much tougher for any domestic steel producer price increases to stick – and it looks as though it may be impossible to stem the tide of flooding imports anytime soon.

Record steel import numbers are harming the likes of AK Steel, Nucor and other producers, and foreign producers such as Vallourec and Tenaris getting more capacity online in the US surely isn’t helping. According to reporting by John Miller of the Wall Street Journal, “First-quarter steel imports by U.S. companies rose 36% from a year earlier to 10.6 million metric tons, according to research firm Global Trade Information Services. That was the highest level since the record 13 million tons reached in 2006.”

FREE Download: The Monthly MMI® Report – covering Steel and Aluminum markets.

(BREAKING: This also isn’t helping – Chinese army hackers breaching AK Steel, US Steel, Alcoa Inc, Allegheny Technologies and Westinghouse’s systems to gain competitive advantage for their state-owned enterprises, as per today’s case filed by the US Justice Department. More on SOE’s in Part Two of this article.)

According to another recent report by the Economic Policy Institute and law firm Stewart and Stewart, some 583,600 total jobs, including more than 200,000 in related manufacturing sectors, are at risk of going “poof” if imports dethrone the competitiveness of domestic steel production.

The US steel industry is not the only one being hit – aluminum imports are also at record highs.

Read more

Which countries are to blame for the glut of steel and aluminum imports flooding American shores? Sure, the usual suspect – China – looms front and center, but another culprit lurks just in its shadow. (We set the stage in Part One of this article; read here if you missed it.)

The wild card is South Korea, specifically if we look at oil country tubular goods (OCTG) imports. According to the EPI report, Korea’s capacity for producing OCTG – which is entirely for export; they use none of it – increased 21.1% from 2010 and 2012, which enabled 47.4% for export, over 90% of which was US-bound.

FREE Download: The Monthly MMI® Report – covering Steel markets.

As for aluminum, other than the spike in Russian imports, Canada took the biggest piece of the pie (as it has for many years); but the second-largest exporter to the US for the first two months of 2014, according to USGS data: the United Arab Emirates. Since power supply is cheap in the Middle East, primary producers have been ramping up smelter capacity, and of course, there’s nowhere for the excess metal to go – except the US.

What do record steel and aluminum imports have in common? China, Korea, India and other countries’ governments essentially shun economics and unfairly subsidize these industries in myriad ways, creating a huge oversupply bubble.

Price Effect

No need to look further than the tale of two charts:

Read more

In part one of this series, Thermal Coal Market: Too Much of a Good Thing?, Stuart Burns examined China’s demand for Asian seaborne coal. Here, he takes a hard look at Japan and South Korea’s evolving thermal coal demand in part two.

Japan and South Korea are both major importers of seaborne coal but, taken as a whole, Asia’s imports this year have fallen seasonally faster than in previous periods, as the below graph from HSBC shows.

FREE Download: The Monthly MMI® Report – price trends for 10 metal markets.

Screen Shot 2014-05-02 at 16.28.11

While power demand growth is expected to remain positive in China, in Japan the likely restart of nuclear power facilities means the end of the thermal coal rebound that started after the March 2011 Fukushima disaster.

HSBC reports that some 17 of the 50 reactors that were shut have applied to restart and two new units are under construction. The eye-watering cost of buying additional fuels, essentially liquid natural gas and coal, has been estimated at $93 billion from March 2011 to early 2013, providing a political incentive even the traumatized Japanese government cannot ignore.

Screen Shot 2014-05-02 at 16.27.58

Monthly coal exports from Australia have risen steadily, as this graph from HSBC shows, and the market remains chronically oversupplied. Wood Mackenzie estimates that the price contracts in Japan were fixed for fiscal year 2014 around $81.80/ton. That was BELOW the cash cost of more than one-fifth of Australian exporters, equivalent to about 45 million tons per annum, according to HSBC.

Screen Shot 2014-05-02 at 16.30.59

Although India’s imports are less than China’s, power demand has been rising there, too, and for the same reasons that rising living standards are driving the uptake of more electrical appliances in addition to demands made by industry.

Screen Shot 2014-05-02 at 16.30.32

Nevertheless, the excess of supply and inability of the supply side to achieve rationalization will cap the commodities’ ability to achieve price increases. HSBC has cut it’s forecast for Australian FOB prices for the Japanese market to $85/ton from $86/ton for 2015. The good news for consumers is that power generators do not have any excuse to raise rates, at least those using coal-fired power generation.

Read more from Stuart Burns.

Turns out Jorge Vazquez and the rest of Harbor Aluminum’s downward revisions for 2012 aluminum prices and beyond aren’t the only ones. The rest of the metals sphere, from copper to nickel to zinc, is souring on price outlooks and forecasts as we pass the midpoint of 2012.

According to a recent Reuters mid-year poll of metals analysts, the usual recent suspects — EU sovereign/bank debt turmoil, tepid US economy, China slowdown — are to blame for this. The IMF has downgraded global growth for next year, and naturally concern arises for how this will affect metal demand. Here’s where the median price forecasts for copper, tin, nickel, zinc, lead and aluminum stand:

Read more

While the ink on the brand-new US-South Korea Free Trade Agreement has barely had time to cool (to say nothing of President Obama’s and President Lee Myung-bak’s mutual courtship), Korea’s domestic 800-pound-gorilla of a steelmaker POSCO has been having some problems lately.

For one thing, POSCO’s profits have been, shall we say, less desirable than expected. Turns out, the global No. 3 steel producer’s bottom line suffered most from currency depreciation. As the Wall Street Journal reported, “currency-translation losses in the third quarter hit POSCO hard they lost 1.08 trillion won ($941 million). Comparatively, in the same quarter last year, they gained 208 billion won ($181.2 million).

How does this seemingly huge swing happen, you might ask? The answer lies in how South Korea’s steel companies invest in the US dollar. According to the Journal, POSCO and others “are susceptible to sharp movements in the won, as most have a largely unhedged net-short position in the dollar. That’s because their import costs, such as for iron ore and coal, exceed their export revenue. In essence, it takes more Korean won (1,178.10 to $1 at the end of September, compared to 1067.70 back in June) to buy the raw materials they need from other countries.

Although POSCO’s senior vice president Jeon Woo-sig was quoted as saying that POSCO will set their long-term sights on foreign raw materials companies and steel mills to merge with and/or acquire to remedy their growth problems, in the short term, the loss affects POSCO’s capex habits. Iron ore and energy producers, among others, must be raking it in, because raw materials costs are causing POSCO to cut spending 18 percent for the year, according to Bloomberg. Arcelor will also be cutting expenses by $1 billion by idling European mills and opting for cost-cutting alternatives.

As if a sorely underwhelming quarterly earnings report isn’t bad enough, POSCO is making moves to improve its distribution operations, which according to this article, are in “desperate need of a new growth engine. The company will now sell its entire product line through its sales outlets, regardless of steel form or type. It’s a classic case of rationalizing one’s supply base customers want to be able to one-stop shop, not having to go to two separate outlets for hot-rolled and cold-rolled products, thereby strengthening their “purchase efficiency. Why this hasn’t happened yet, well, who knows.

Adding insult to injury, all POSCO wants to do is build some steel plants in Dhinkia, Nuagaon and Gadakujang, India but it’s running into local opposition. NHRC teams are investigating alleged human rights abuses on the proposed sites, according to this New India Express dispatch. Villagers claim that the land rights belong to them, under the Forest Rights Act, since their forefathers have lived there since 1930.

Looks like trying times for the Korean steel market’s biggest player.

–Taras Berezowsky

The US has had not one, but two huge policy developments come around this week. The US Senate voted Tuesday to pass the Currency Exchange Rate Oversight Act of 2011 (S. 1619) with 63 for and 35 against, much to the chagrin of a number of Republicans including John Boehner. (Subsequent action by the People’s Bank of China to depreciate the yuan further stoked the flames of a potential trade war, and could become a follow-up post in and of itself.) Then on Wednesday, the Senate and House both voted  to pass the South Korea free trade agreement which has spurred controversies of its own.

What stands at the core of this flurry of policy activity free trade spins off many thoughts, opinions and writings about how the US can compete in today’s global marketplace. Today, we’ll focus on just a tiny sliver of the issues surrounding free trade and economic advantage — how the country’s workforce and culture of education compares to others in Asia and Europe; namely, South Korea and Germany.

The New York Times ran a story about President Obama’s budding buddy-buddy relationship with South Korea’s president Lee Myung-bak a relationship that’s uncharacteristic of Obama, as he tries to keep his personal ties with leaders as cool as possible. While most of the article is a non-story about this “man-crush, as the paper puts it, it mentioned key differences between Koreans and Americans:

  • More South Koreans graduate from college than Americans
  • South Korean schools are hiring more and more teachers to satisfy parental demand; American teachers are increasingly being laid off to cut costs
  • 90 percent of South Korea’s population has access to a high-speed broadband network, compared to only 65 percent of Americans

While these differences seem largely anecdotal, they point to a different educational approach. In the EU’s largest exporter and richest country by GDP, educational approaches are also much different than in the US, especially regarding vocational and technical training. Germany has higher corporate taxes, higher numbers of unionized workforce, and more vacation days per worker, yet is able to pay its workers more and still have a $184 billion trade surplus (as of 2010). Marko Slusarczuk, an analyst at the Institute for Defense Analyses, recently expounded on a why that is, in a Manufacturing and Technology News article:

  • Germany splits its students into a two-track system as early as 4th grade; you’re either on the academic or vocational track (Berufsfachschulen), onto which two-thirds of students are placed, while less than 20 percent of American students choose vocational/technical programs
  • There’s no social stigma in Germany over pursuing the trades, while the opposite has become true in the US over the past several decades
  • Every German vocational student undergoes a rigorous apprenticeship program, while in the US, most apprenticeship programs require students to be at least 18, which does not ensure maximum participation, and the for-profit nature of many trade schools is at odds with how apprenticeships are run through companies

Slusarczuk’s point is that our future manufacturing base and subsequent success is dependent upon government setting an example for more effective education priorities. Instead of pushing students into four-year college programs, or a jobs (spending) bill, they must put more focus on reversing the mentality Americans have regarding education, especially if we want to compete with the likes of South Korea, Germany and others. If we keep entering faulty free trade agreements, the education and apprenticeships in those types of countries put our economic prosperity at a major disadvantage.

Education, vocational training and manufacturing should not, in other words, be mutually exclusive definitions.

–Taras Berezowsky

(Continued from Part One.)

How ready the world’s gas companies will be to buy Chinese LNG carriers ultimately remains to be seen. In large part it will probably come down to how insurable they will be and that in turn will rest on the certification, such as Lloyds Register, DNV or ABS that will oversee the construction and sign off the finished vessels.

While the money is undoubtedly in the more sophisticated civil market, Beijing also has an eye on the military market, initially for the Chinese navy, but in time no doubt as an export opportunity. So far they have not proved terribly adept.

An Economist article examines China’s efforts to acquire an aircraft carrier. According to the article, on Aug. 10, after years of secretive conversion work, the Chinese navy launched its first aircraft carrier. Except that it wasn’t China’s — the yet-to-be-named vessel was purchased from Ukraine in 1998, where it had apparently been rusting, half-finished, after being started ten years earlier not exactly cutting edge then.

Maybe that is unfair. As with some of the US’ aging battleships, the original date of construction matters less than the weapons systems on board; a WWII battleship with modern firepower can be plenty enough intimidating if floating off your coast. China’s neighbors aren’t too impressed by Beijing’s intentions either, viewing them as a dangerous extension of China’s naval power. Strangely, China is the only member of the UN Security Council without an aircraft carrier (India has had one for a long time and even Thailand has one).

Although China is reported to be building two carriers from scratch, solid details are few and far between, suggesting they are still a long way from completion. Like complex civil vessels, aircraft carriers are sophisticated ships, and no doubt China will get there in time. But as with civil vessels, few are keen to help them along.

–Stuart Burns