Weighing the Merits of Steel Anti-Dumping Cases

Whoever said, the older I get the less I know, got it right and in particular, around free trade as it relates to the steel industry. We have consistently written about the subject of free trade, both at a macro level such as these recent posts on the trade deficit and potential solutions to redress that issue as well as the conflict surrounding US Dollar and China RMB exchange rates.   And by looking at our latter pieces, including one Stuart wrote about a steel anti-dumping case coming out of Europe, one might conclude that our position on trade has shifted from Ëœardent free-trade supporters to supporters with skepticism’.

Even though we predicted an increase in the number of anti-dumping cases, and an administration less Ëœtrade friendly’, some of the cases have taken some time to splash mainstream news pages including two big ones within the steel industry. This one on China steel line pipe (where the US Dept of Commerce slapped steep anti-dumping duties on welded pipe from China) and this new one recently filed which covers China OCTG (oil country tubular goods) provide the metal industry with an opportunity to examine the merits of both cases in context of some of the macro issues ” did China manipulate its currency – as well as were steel products dumped into the US market.

Back on April 13 we wrote that the steel industry appeared to have incurred harm (we read through the 200+ page ruling) and the evidence seemed to support that conclusion. China had grown its market share disproportionately and based on the timing of when the goods had come over, the domestic steel industry’s arguments helped them win the case.

However, upon examination of the OCTG case, particularly in context of the other side (e.g. steel buyers) and importers as represented by the American Institute of International Steel (AIIS), the case for anti-dumping appears far less clear. AIIS makes several relevant points. First, for those in the oil and gas industry who remember back to June of 2008, US Steel issued an $800/ton price increase along with a surcharge effective immediately. Market conditions indicated demand far exceeded supply. The words allocation and assurance of supply had become mantra of the day this time a year ago. According to AIIS, US Steel announced an additional $200/ton increase in September 2008. Any domestic mill capable of levying that type of an increase (both in percentage and actual dollar terms) does not appear harmed by any measure. Currency rates stayed the same (China did not make any additional adjustments during that time period). Did the Chinese government create any new special tax schemes or VAT rebate, a “subsidy” in effect which suddenly made OCTG goods more competitive for exports? We still need to research that question but would venture to guess that no tax change caused any sudden “dumping” of these products.

Now that demand has slowed considerably, major capital projects face postponement or delay and the materials ordered offshore lag domestic orders because of freight and logistics, the domestic industry sees a supply overhang, with greatly reduced buying volumes. The AIIS reports 2009 pipe and tube imports remain very low. Perhaps on the back of a successful anti-dumping case against Chinese line pipe producers, the domestic OCTG producers hope for a similar outcome. But on the face of it, this one seems a bit hard to swallow.

–Lisa Reisman

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  • I wonder how the US would respond to a Chinese firm purchasing a US Steel mill such as Gary works and then idling that plant when the Chinese industry slowed down to keep Chinese plants capacity up by making those orders in China and then shipping them to US companies who originally received those orders from Gary.
    Would US Steel see that as unethical ? Would the government respond? Well, that is exactly what US Steel has done by idling it’s Lake Erie plant in Canada.

  • Al, you make an interesting point, has this occured at any other Canadian facilities?

  • Step back further and you can see the consolidation in this market (USS acquiring Lone Star, Tenaris acquiring Maverick) to create these oligopolistic capacity constraints and pricing conditions that the domestics have taken advantage of, ie $800 / ton increase. Tenaris was involved in previous OCTG case sunset to allow their companies to ship from Mexico & Argentina to benefit from these high prices. With these price increases, why wouldn’t world-wide companies want to participate in the gouging frenzy?

  • It has also happened to the Hamilton Works facility,however, this facility provides galvanizing etc. for the hot rolled steel at Lake Erie. It did make slabs as well but with US Steel shutting down he Coke Oven and Furnace it is extremely unlikely that they would start any primary steelmaking operations there again. Besides, Lake Erie is the newest steelmaking operation in North America and makes excellent quality steel and can produce plenty given the upgrades and expansion over the past 4-5 years.

  • The steel unions trying to demonize China for the current OCTG market conditions is almost as stupid as if GM were blaming their failure on Toyota but alas political contributions made upon the backs of workers may pay off for these crooks once again……one can only hope NOT !


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