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%.

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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.

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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.

Steel in Free Trade Agreements

Steel is one of the many commodities that make up an FTA. At the time of signing its FTAs with Japan and Korea, the global steel scenario was very different compared to the one seen today. It was flourishing and market demand for quality steel was high, both in India and abroad. Now, in 2015 though, the situation is downright bleak.

India represents a growing market, which will require copious amounts of steel for infrastructure and other sectors. So nations such as China, Japan and Korea are dumping inferior steel into the Indian market. The foreign steel is being bought and specified because of its attractive price range.

Many here feel that the FTAs that India signed with Japan and Korea are flawed. Under these agreements, duties paid on imported finished steel products from these countries were given a waiver of 5%. Import duties on goods imported from these two countries was 2.5% compared to the usual duty of 7.5%.

Then Vs. Now

While such FTAs may have worked before, experts are of the opinion that India’s deals with South Korea and Japan weighed heavily in the latter’s favor. The Indian steel ministry already highlighted these concerns to the government, which eventually came around to the view that steel should now be removed from the FTA list. Unfortunately that’s not going to happen any time soon.

Some steel leaders here have pointed to the recent passage of the Leveling the Playing Field Act. This legislation, they said, was designed to give American companies new ways to fight unfair trade practices. That’s the way the Indian government needs to go if it is to protect its own steel industry.

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The author, Sohrab Darabshaw, contributes an Indian perspective on industrial metals markets to MetalMiner.

 

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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.

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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%.

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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.

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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.

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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.”

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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.

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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.

Of course, taking recourse through the International Trade Commission (ITC), US Commerce Department and the World Trade Organization (WTO) to impose stricter duties and tariffs is the main way for US companies to say “We Mean Business.” But even then, it’s not a sure thing; especially since China and others will continue to over-produce as they’re incentivized to do, harming global prices. Not only that, but Commerce/ITC/WTO case determinations take months, and the latest verdicts aren’t due until later this summer – at the earliest.

So what are steel and aluminum purchasing organizations to do?

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

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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 […]

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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 […]

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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 […]

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(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 […]

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