South Korea

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

Tariffs were place on Chinese steel imported into the E.U. and the Commerce Department. placed more on phosphor copper coming into the U.S.

EU Tariffs on Chinese Steel

The European Union will impose duties on two grades of steel imported into the currency bloc from China to counter what it says are unfairly low prices.

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The duties are set at between 13.2 and 22.6% for hot-rolled flat iron and steel products and at between 65.1 and 73.7% for heavy-plate steel, according to a filing in the European Union’s official journal.

Anti-Dumping Duties on Phosphor Copper

Not to be outdone, The Department of Commerce placed tariffs on allegedly dumped imports of phosphor copper from the Republic of Korea yesterday.

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Commerce found, preliminarily, that dumping occurred by mandatory respondent Bongsan Co. Ltd. by a dumping margin of 3.79%. All other producers from South Korea also received 3.79% anti-dumping duties. U.S. Customs and Border Patrol will now collect cash deposits upon import of the copper. The petitioner is Metallurgical Products Company of Pennsylvania.

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. 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.

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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%.

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%.

Vietnam

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%.

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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.

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.”

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(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.

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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.

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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:

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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.

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.

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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.

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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.

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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.

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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:

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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 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