US

The imposition of anti-dumping duties by the Indian government should encourage US authorities who have been asked to enforce a similar move. The suit filed by six US companies concerns corrosion-resistant steel, a type of coated steel used in automobile and construction industries. The US has been witnessing an unprecedented flood of imports in the last one year or so.

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As reported by MetalMiner last month, the US steel industry is suffering because the imports hit a record 34% of market share, according to the American Iron and Steel Institute (AISI).

The US slapped duties on imports of steel used in the energy industry from South Korea and five other countries last year but, evidently, those tariffs did not have the desired effect. The AISI in its press briefing last month, asked the US Government to first enforce existing trade laws which would be an immense help to the steel industry.

In India, steel imports had increased to 0.91 million metric tons this May, an increase of 58% as compared to the same month’s figure last year. As compared to April 2015, the import rate was up by about 20 mt, according to a report by the Ministry of Steel.

Many analysts said the Indian stainless steel industry started resembling a sick industry, as cheap imports were leading to a situation of under-utilization of installed capacities. The local industry hopes the anti-dumping duties will send out a clear signal to those sending in cheap imports, and lead to a resurgence in India’s steel sector.

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

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Current prices for US HRC are around $470 per ton ex-works, although big buyers dealing with some mills can still pay $450 per ton.

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Steel-Insight believes that this is close to the bottom, but we don’t expect a sharp turnaround anytime soon. So why is this a pricing trough?

Further Discounting

First, those big discounted prices have been available for around three weeks and some big distributors and tube buyers have pulled the trigger at the $450 per ton level. That has helped push out mill lead times back to four weeks and lessened the need to discount heavily. We understand that integrated mills are now far more reluctant to discount below $470 per ton. There could be further discounting on cold-rolled coil front as the spread remains too high compared to cost.

Second, shredded scrap prices look like they are stabilizing at around $250-260 per ton delivered to Midwest mills. That means mini-mills are not likely to discount below $450 per ton as they would lose money and they don’t need to take that business to fill their order books now. International scrap prices have bumped up a little, although they lack the overall momentum to rise much more, while scrap flows into yards slowed with the lower prices.

Finally, there has been a supply response.

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A recent article in India’s Economic Times is typical of recent coverage that makes much fanfare of India’s rise to 3rd-largest steel producer in the world at the expense of the USA which slipped to 4th.

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The differences are relatively small, based on data compiled by World Steel Association (WSA) India’s production growth was the world’s highest during the January-February period at 7.6% to 14.56 million metric tons, compared to the US which slipped back to 13.52 mmt. According to the ISSB, India produced about 86.5 mmt compared to the 88.2 mmt from the the US, but the US is facing a strong dollar denting its export markets and — by way of that same strong dollar and massive global overcapacity — a tsunami of imported steel. According to the ITA in 2014, US imports of steel mill products totaled 40.2 mmt, a 37.9% increase from 29.2 mmt in 2013.

What it Means

First, should we worry about India taking 3rd place spot from the USA in steel production?

Looking at it dispassionately, no. It is inevitable that an emerging market with a population of 1.25 billion and with a projected increase in its urban population from 400 million to 600mm by the end of the decade. At the same time as it industrializes and invests in infrastructure, India is going to need to build substantial steel capacity.

The US, on the other hand, has a mature industrial landscape with a quarter of India’s population and while it has some of the most efficient and lowest-cost steel production in the world it still operates in a high-cost environment with stringent environmental and health and safety controls that inevitably have an impact on the industry’s ability to compete in overseas markets.

So 3rd spot or 4th spot is really no more than symbolism. What is more important is whether or not the change tells us anything about global steel markets. Is India’s rise achieved unfairly by subsidy or state support as China is often accused of benefiting from? Although we laid out good reasons why Indian domestic demand would stay high and rise, in fact the country exports about the same percentage of its total production as the US and the trend is growing. So, not all of that steel is being consumed domestically and the country’s steel industry has aspirations to be a regional supplier not just meet domestic demand growth.

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Invariably whenever prices for commodities fall, domestic producers begin sounding the alarm bells. And those bells are ringing loud and clear when it comes to steel imports from China, according to a recent Wall Street Journal article.

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The comments on that story, on the other hand, tend to center on free trade, fair markets and protectionism. They tend to support the point of view of the buying organization and not the domestic producer.

But most commentators don’t spend the time poring through steel data to engage in an informed debate. From our vantage point, several factors should be part of any trade analysis.

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There is no assurance in India as to whether the nuclear deal “work around” Prime Minister Narendra Modi reached with US President Barack Obama this week will pass legal muster, since India’s parliament, based on international norms, passed a very stringent law earlier under a previous government.

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An agreement was signed on civil nuclear cooperation between the two nations in 2008, and India had to put in place a nuclear liability regime to pass international norms, which makes the supplier, in this case US firms providing the prospective nuclear plants’ technology, financially responsible for any mishaps. Now, both leaders have agreed to “bypassing” this major stumbling block by bringing in Indian insurance companies.

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An article by a colleague of mine at our sister publication SpendMatters highlighted the plight of Cuba following 50 years of isolation under communist Fidel Castro’s regime.

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The economy has been stuck in a time bubble with virtually no external investment and very limited export markets, resulting in a stagnation that has left the population well-educated but ridiculously poor by modern standards. Although Cuba isn’t blessed with untold riches in terms of natural resources it does have significant nickel reserves, and managed with soviet help to be a substantial nickel exporter in previous decades.

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The World Steel Association (WSA) has released steel production data for the first 9 months of the year.

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At 62.41 million tons (mt), the top 3 were China, Japan and the US. India was number 4. In terms of production growth rate, though, India was in a slightly better position than the other top producers. The WSA data revealed that India’s steel production had grown by 1.8% over the first 3 quarters of 2014, which was the second-highest among the top 4 steel-producing nations. Last year, in the same period, India produced 61.27 mt of steel.

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The Commerce Department on Tuesday dropped a preliminary decision to impose anti-dumping duties on steel rebar imports from Turkey, a ruling US rebar producers called a “shock” because they thought they had a strong case.

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The ruling, essentially, means that there will be little penalty on imports from Turkey.

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The week in review at MetalMiner featured anti-dumping duties, conflict minerals compliance, 3D design and construction and even Chinese hydraulic fracking. FREE Download: The Monthly MMI® Report – price trends for 10 metal markets.

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A quiet battle has begun to brew over steel imports and exports between Mexico and the United States. The Commerce Dept. issued a preliminary determination that both Turkey and Mexico have “dumped” rebar into the US. Mexican producers face duties of between 10-66%, depending on the mill and Turkish importers face a 0-2.64% duty. FREE Download: The Monthly MMI® Report – covering Steel/Iron Ore markets.

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