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The U.S. Department of Commerce. qingwa/Adobe Stock

When the Department of Commerce announced  last month that Secretary of Commerce Wilbur Ross had forwarded his Section 232 steel report (and the following week, aluminum) to President Donald Trump, the details of the report were not made public.

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That changed Friday, as the department released the reports outlining the potential strategies recommended to Trump (who met with lawmakers earlier this week to discuss potential tariffs on steel and aluminum imports).

“The United States is the world’s largest importer of steel,” Ross said during a briefing Friday morning. “Our imports are nearly four times our exports.”

Section 232 of the Trade Expansion Act of 1962 grants the president authority to limit or restrict imports that are determined to have an impact on national security. The last 232 investigation came in 2001, when the George W. Bush administration investigated semi-finished steel and iron ore imports. (The Department of Commerce ultimately determined the imports did not negatively impact national security.)

The U.S. currently has 169 anti-dumping and countervailing duty orders in place for steel, which some critics have argued has served as only a patchwork defense. Of those 169 orders, 29 are against China, Ross added.

Laying the background for the proposals, Ross cited findings of the report, including the global rise in steelmaking capacity, which is up to 2.4 billion metric tons (a jump of 127% since 2000). In addition, global excess capacity is 700 million tons, with China’s excess capacity exceeding the total U.S. steelmaking capacity, according to the report.

“Excessive steel imports have adversely impacted the steel industry,” the report states. “Numerous U.S. steel mill closures, a substantial decline in employment, lost domestic sales and market share, and marginal annual net income for U.S.-based steel companies illustrate the decline of the U.S. steel industry.”

Steel Recommendations Include 24% Tariff on All Products From All Countries

The 232 steel report lays out a trio of options, ranging from a blanket, all-encompassing tariff structure to more targeted approaches:

  1. A global tariff of at least 24% on all steel imports from all countries
  2. A tariff of at least 53% on all steel imports from 12 countries (Brazil, China, Costa Rica, Egypt, India, Malaysia, Republic of Korea, Russia, South Africa, Thailand, Turkey and Vietnam) with a quota by product on steel imports from all other countries equal to 100% of their 2017 exports to the United States
  3. A quota on all steel products from all countries equal to 63% of each country’s 2017 exports to the United States

When asked how the department created the list of 12 countries included in the second option, Ross said the selection process wasn’t “formulaic,” but they considered things like the rate of expansion of capacity in recent years and the nature of the products being shipped to the U.S., among other things.

“Anything in trade is very, very complex,” Ross said. “And therefore [there’s] not a single factor. The  rate of increase in exports to the U.S. was in each case a big factor.”

Administration Looks to Provide Jolt to Aluminum Industry

As for aluminum, the three recommendations were:

  1. A tariff of at least 7.7% on all aluminum exports from all countries
  2. A tariff of 23.6% on all products from China, Hong Kong, Russia, Venezuela and Vietnam, with all other countries be subject to quotas equal to 100% of their 2017 exports to the United States
  3. A quota on all imports from all countries equal to a maximum of 86.7% of their 2017 exports to the United States.

According to Ross during a Friday morning briefing, the goal is to up the domestic aluminum industry’s capacity, currently hovering around 48%, to 80%. According to the aluminum report, the U.S. imported five times as much tonnage of primary aluminum as it produced in 2016, with the import penetration level rising to 90% from 65% in 2012.

As with steel, the aluminum report pointed to Chinese excess capacity.

“China’s industrial policies encourage development and domination of the entire aluminum production chain,” the report states. “These policies are further intended to stimulate the export of aluminum processed into sheets, plates, rods, bars, foils and other semi-manufactures and to target development of increasingly sophisticated and high-value product sectors such as automotive and aerospace.”

According to Section 232, Trump has 90 days as of receipt of Ross’ report to act. In the case of steel, that makes for an April 11 deadline, with an April 19 deadline set for aluminum.

The Section 232 investigations were launched last April, after which it seemed as if the administration would be set to release its reports by the end of June. But, June came and went without an announcement, as did the remainder of the calendar year. During that year, steel imports rose 15.4% year over year, according to American Iron and Steel Institute report citing U.S. Census Bureau data, leading some domestic industry figures to point out the delay’s impact on import levels.

Ross admitted that timeline was overly ambitious.

“We were a little bit over-optimistic about how quickly such a complicated topic could be brought to a head,” Ross said. “Government tends to move slowly. It’s one of the many lessons I’ve learned coming down here.”

The president does have the authority to revise any of the proposals and come to the table with a different policy solution.

“He will decide what he is going to do,” Ross said of Trump. “It’s not for me to speculate what action he might take. But I do reemphasize that he is not bound by these exact recommendations. He can do something totally different.”

In a release, Scott Paul, president of the Alliance for American Manufacturing, urged action.

“We believe the action must be broad, robust and comprehensive, and the Commerce Department report makes a compelling case for immediate action. Any exclusions deserve appropriate scrutiny. Otherwise, the Washington swamp will be filled with importers trying to undermine American jobs.

“American workers are counting on President Trump to stand up for them.”

In its own response to the release of the reports, the Aluminum Association reiterated past statements, chiefly to ask for a solution that specifically addresses China and does not harm market economy trading partners like Canada and the European Union.

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“We look forward to working with the president on a final decision that helps support continued growth in the U.S. aluminum industry,” said Heidi Brock, president and CEO of the Aluminum Association, in a prepared statement. “Ultimately, we favor a negotiated, enforceable government-to-government agreement with China on overcapacity.”

On the subject of retaliation and challenges to any potential trade action at the World Trade Organization, Ross pointed to other nations’ import barriers, citing the automobile tariffs among the U.S. (2.5%), E.U. (10%) and China (25%) as an example.

“There already are extreme protectionist measures,” he said. “I don’t believe there’s a country on the targeted list that we have that doesn’t have far more protective features on its industry than we do already.”

The full steel report is available on the Department of Commerce website, as is the full aluminum report.


gui yong nian/Adobe Stock

The European Steel Association’s (EUROFER) recent steel market overview hailed 2017 as an “expansionary” year for the industry while also issuing positive sentiment about 2018 and 2019.

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The overview said apparent steel consumption in Q3 2017 rose 1.1% year over year in the European Union.

As for imports, it was a tale of two halves.

According to the report, imports rose 8% year over year in the first half of 2017. That reversed in the second half, however, and imports ultimately fell 14% for the year as a whole.

“This decline has occurred in the context of improving in global steel prices – largely driven by the Chinese market – which narrowed the gap between EU domestic prices and imports,” the Eurofer market overview states. “Other restraining factors include the moderation of imports, particularly from China, but also other countries affected by the imposition of anti-dumping and anti-subsidy measures by the European Commission. However, other third country suppliers have triggered increased exports to the EU, substituting for this drop.”

Eurofer estimated steel demand jumped by approximately 1.9% in 2017. The association indicated positive feelings that that upward momentum can continue in 2018 and 2019.

“Prospects for the continued recovery of EU steel demand are positive,” said Axel Eggert, director general of Eurofer. “The expected strength of most steel-using sectors bodes well for the demand side of the EU steel market. The supply side situation could, however, continue to be negatively affected by import distortions.”

Last year was an expansionary one for steel-using sectors, according to Eurofer, with notable growth in Central Europe, in particular.

“The outlook for 2018 and 2019 is positive, although activity in steel-using sectors will settle back into a more moderate pace of expansion owing to waning momentum in the tube sector and automotive industry,” the report states. “Underlying economic conditions remain supportive to a steady pace of expansion in other sectors.”

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The full market overview is available on Eurofer’s website.