Steel

U.S. Flat-rolled steel prices have dropped $20-40/ton so far in August, bringing hot-rolled coil down to $580-600/ton ex-works Midwest.

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There are two schools of thought. First, the current dip reflects a typical holiday slowdown and prices will hold or come back in September. In that scenario, buyers need to secure Q4 requirements and will return to ordering in September. On the supply side, mills are taking downtime in October and Q4 for maintenance, there is still some idled capacity (U.S. Steel and AK Steel) while higher-than-expected final HRC duties and tariffs will keep out imports. The steel market will, therefore, tighten and prices will hold at the current high levels.

U.S. HRC, CRC, HDG Imports (000 tons)

Steel_insight_us_hrc_crc_HDG_imports_082316

Source: AISI, Steel-Insight.

Steel-Insight could not disagree more. While we don’t expect freefall just yet, we do expect HRC prices to be back in the high $300s/ton at some point next year. Read more

Another Chinese steelmaker, Bohai Steel Group, has been given a bailout and Japan’s Tokyo Steel Manufacturing has left prices unchanged for three months.

Bohai Bailout

Bohai Steel Group, the indebted state-owned conglomerate, may receive help from a local government bailout fund to restructure its debts, the online financial magazine Caixin said over the weekend.

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Bohai Steel, which was created in 2010 through the combination of four manufacturers, holds liabilities of $28.9 billion (192 billion CNY) from 105 creditors, alongside assets of nearly CNY 290 billion, Caixin reported.

The Tianjin government plans to create a local asset manager to assist in the debt workout of Bohai Steel, alongside other troubled Tianjin enterprises, the magazine said.

Restructuring of the group represented the biggest since the global financial crisis, Standard & Poor’s analyst Christopher Lee told Reuters in March.

Tokyo Steel Leaves Prices Unchanged

Tokyo Steel Manufacturing, Japan’s top electric arc furnace steelmaker, said on Monday it would keep product prices unchanged for the third month in September, reflecting a slow recovery in its local market.

Free Download: The August 2016 MMI Report

Tokyo Steel’s pricing strategy is closely watched by Asian rivals such as POSCO, Hyundai Steel Co. and Baosteel, which all export to Japan.

An administrative law judge who suspended U.S. Steel Corp.‘s 337 case against 40 Chinese steel companies earlier this year improperly linked the case to the anti-dumping and countervailing duty investigations handled by a separate government agency — the Department of Commerce — according to an International Trade Commission opinion.

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The commissioners initially overturned the suspension on Aug. 5, but did not issue their opinion until yesterday.

US Steel’s Anti-Dumping Cases Not Significantly Related

The commissioners, in overturning the suspension of U.S. Steel’s case, determined ITC rules do not allow for the suspension of a 337 investigation simply in order to notify the Commerce Department as required by statute, and that elements of U.S. Steel’s case involving allegations of price fixing and transshipment “are, at most only partially related to anti-dumping and countervailing duties.”

Administrative Law Judge Dee Lord suspended the case on July 6 because Commerce was not notified of the investigation, and because elements involving price fixing and transshipment, at least partially, fell under the scope of Commerce’s antidumping and countervailing duty investigations.

U.S. Steel’s initial petition, filed on April 26, cites allegations of collusion and price fixing, transshipment to evade anti-dumping/countervailing duties, and theft of trade secrets via hacking by Chinese agents.

Free Download: The August 2016 MMI Report

U.S. Steel is seeking a general exclusion order to block all Chinese carbon and alloy steel products from the U.S. market, a limited exclusion order blocking imports from 40 listed steel companies and a cease-and-desist order for their alleged illegal practices.

U.S. Steel claimed that a hack similar to one that happened in 2011 to it and other companies was carried out to acquire the recipe and production process of a popular automotive steel alloy, dual-phase 980, that Baosteel and other Chinese companies began offering shortly after the hack,

At least according to a European Union official familiar with the Union’s steel sector plans, says Reuters.

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The E.U. is certainly ramping up the pressure. This year, alone, the European Commission has 37 anti-dumping and anti-subsidy measures in place for steel products, 15 of them concerning China, slapping anti-dumping duties on products such as rebar, cold-rolled carbon steel and cold-rolled stainless steel, ranging between 18.4 and 25.3% for imports from China.

Everybody Gets on the Tariff Bandwagon

The E.U. is scheduled to rule on plate and hot-rolled coil from China in November and while rates haven’t been at the same level as the U.S. where up to 520% duties are have been applied, they are estimated by the industry to need to be in the 30-40% range in order to be effective.

Steel mills Molten iron smelting furnace production line

Can China’s zombie steel mills be shut down? Beijing is trying a new tactic. Source: Adobe Stock/ZJK.

Yet despite the unprecedented level of action, carbon steel imports in the year to May rose 21% with China now representing 27% of total E.U. imports, while stainless steel imports rose 17% over the period, E.U. data shows, even though demand remained almost flat. Read more

Saudi Arabia is pushing for an oil production cut among its fellow OPEC nations as well as other big producers such as Russia. In China, Beijing is pushing local governments to cut steel overcapacity.

Saudis: Let’s Make a Production Cut Deal

The Organization of Petroleum Exporting Countries will probably revive talks on freezing oil output levels when it meets non-OPEC nations next month as top exporter Saudi Arabia appears to want higher prices, according to OPEC sources, although Iran, Iraq and Russia present obstacles to a deal.

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Riyadh sharply raised expectations for a global production deal between on Thursday when Energy Minister Khalid al-Falih said Saudi Arabia will work with OPEC and non-OPEC members to help stabilise oil markets.

China Vows to Accelerate Steel Capacity Cuts

China should quicken capacity cuts in its bloated steel and coal sectors, the country’s top economic planning agency said on Tuesday, putting pressure on local officials to meet annual targets despite some worries the steps could hurt economic growth.

Free Download: The August 2016 MMI Report

China has promised to slash steel capacity by 45 million metric tons and coal capacity by 250 mmt this year, as it tries to rejuvenate two industries suffering from slowing demand and a massive supply glut.

China’s crude steel output fell in July and Glencore has shelved plans to sell a copper mine in Chile.

Chinese Steel Output Falls

China’s average daily crude steel output fell in July from a record, government data showed on Friday, providing some respite to overseas rivals angered by a torrent of cheap steel from Chinese mills in the past year.

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The output decline reflected China’s efforts to address a chronic glut, and analysts predict production may shrink further in the months ahead as more mills shutter. Some analysts predict output may shrink further in the months ahead as more mills shut in a sector undergoing its most significant — and painful — restructuring in two decades.

Glencore Rethinking Chilean Mine Sale

Glencore has shelved plans to sell a copper mine in Chile that was expected to fetch about $500 million, after failing to achieve a high enough price, according to people familiar with the situation.

Free Download: The August 2016 MMI Report

Along with other big mining companies, Glencore has been seeking to offload a range of assets to reduce debt following a commodities price crash, but a rally in raw materials markets and in the value of share prices of mining companies this year has taken away the need for urgent sales at any price.

However, it appears unclear as to who will reap the benefits.

Compare Prices With The July 2016 MMI Report

The story begins with the U.S. GOES trade case that resulted in no duties applied to imported products to the U.S. However, U.S. power equipment manufacturers moved to alternative sources all the same, importing wound and stacked cores instead of purchasing GOES from domestic sources. Despite the unfavorable ruling for the U.S. domestic producers, other countries soon began filing anti-dumping cases.

GOES_Chart_August_2016_FNL

Chinese producers Wuhan Iron & Steel Co. and Baoshan Iron and Steel persuaded the Chinese government to rule against Japanese, Korean and European producers of GOES. The Republic of Korea received final duties of 37.3%. The preliminary duties on Korea, however, had been 14.5%-29.5%. The final duty rate, coming in significantly higher will likely shut down all Korean exports to China. With Japan receiving duties over 45%, both countries will no longer sell GOES into China.

According to a recent Reuters report, China imported over 120,000 metric tons of GOES of which over 95,000 mt came from Japan and Korea combined. Much of that material likely included the higher performing GOES grades. Japan had already started to withdraw from the Chinese market. Now China will need to find equivalent supply domestically which could limit GOES exports from China.

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In the meantime, here in the U.S., a word of clarity on the cold-rolled coil dumping case – grain-oriented electrical steel was “specifically excluded from the scope of this investigation”.

U.S. GOES prices inched up slightly.

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The battle has intensified between the European Union and low-cost steel suppliers to the region. Specifically, the E.U. is taking action against China and Russia by imposing more anti-dumping duties on steel products from those regions, and for the first time applied them retroactively, according to the Financial Times.

Duties on Foreign Steel

The FT said the duties on cold-rolled steel range up to 22.1% for Chinese imports and up to 36.1% for Russian imports. The rates are a little higher than the provisional penalties in place since February.

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Using a different calculation method, the U.S. imposed tariffs in excess of 500% on similar cold-rolled steel materials from China earlier this year and the E.U. Commission is said to be planning further measures that would allow it to impose U.S.-style tariffs against steel that is believed to be dumped at particularly low prices or is subsidized. Read more

Source: Thomson Reuters Datastream/China Customs 8/9/2016

Source: Thomson Reuters Datastream/China Customs 8/9/2016

Chinese steel exports rose in the first half of 2016, despite promises of production cutbacks.

The U.S. International Trade Commission, on Friday, overturned an administrative law judge’s order temporarily suspending U.S. Steel‘s 337 petition seeking to block all Chinese carbon and alloy steel products from entering the U.S. market.

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The move comes ahead of a meeting of senior US and Chinese officials in Beijing next week. U.S. Steel, in late April, filed the case under the Section 337 rule, which allows trade sanctions for intellectual property theft.

It alleged that some four dozen Chinese companies and their U.S. subsidiaries had both acted as a cartel and benefited from the cyber theft of its production secrets.

Free Download: The July 2016 MMI Report

The ITC gave the go-ahead for the case to proceed, setting the stage for a legal battle that experts say could probably take more than a year for an administrative judge to decide.