Double Digit Duties Applied to Chinese Seamless Steel Pipe

The latest in a string of anti dumping cases brought against China since the economic downturn has resulted in preliminary duties of 11 to 13% being applied on seamless steel pipe from China according to an article in Reuters. The latest case concerns seamless carbon and alloy pipe of 16 inches or less in outside diameter used in industrial piping systems to carry water, steam, petrochemicals, chemicals, oil products, natural gas and other liquids and gasses.

Quoting Commerce Department figures, the Washington Post stated that the volume of steel pipes imported from China more than tripled between 2006 and 2008, rising from $632 million to $2.6 billion, according to the Commerce Department. The China Daily defended the country’s steel makers by saying China was a large importer of steel before 2005, but massive investments in the steel industry have resulted in an increase in capacity. In 2008, China’s exports of steel pipes reached $3.2 billion, accounting for over half of the total US imports of steel pipes. But from January to November 2009, China’s exports to the US made up for merely 14% of US total imports. And, according to US figures, US imports of steel pipe shrank by 50% during the first 10 months of 2009, no doubt partly due to earlier calls from the domestic steel industry for anti dumping measures to be brought against Chinese producers.

Domestic steel producers led by US Steel and the United Steel Workers but signed by many others, claimed the subsidies from the Chinese government allowed the firms to overwhelm their U.S. rivals. The companies alleged that their Chinese rivals received discounts on raw material and loans from government-owned firms. Needless to say, the Chinese vehemently deny the claims saying they have to pay market rates for their raw steel and are funded by bank loans at commercial domestic Chinese rates. Unfortunately, the data provided by those bringing the case is not yet available to the public for wider review, but may be in early this month. They may be right that bank loans are not at commercial levels or that somehow state and private steel producers have been coerced into supplying the pipe makers with raw material at subsidized prices but until the data is made available, we have no way of checking. Knowing how ruthlessly Chinese companies tend to compete against each other, extracting the highest possible price they can in what is a cutthroat domestic market, we find it hard to believe they are being subsidized in terms of cheap raw materials but low cost loans are a distinct possibility, as we have written elsewhere the Chinese banks have been almost forcing loans onto the commercial sector. Cheap land and tax breaks in the early years of operation are also a possibility, conceivably reduced power tariffs – we have seen that for aluminum producers, but then loans and tax breaks are often extended to firms in the US too. All in all it is easy to see how a combination of small advantages could add up to a significant cumulative advantage justifying anti dumping tariffs, we eagerly await the details.

Meanwhile according to China the Commerce Department set a preliminary duty rate of 12.97% on the Hengyang group of companies and 11.065% on the Tianjin Pipe Group Co and related firms. All other Chinese producers and exporters will face a countrywide duty rate of 12.025%, according to the site.

Some observers were casting around for a commodity on which the Chinese could retaliate and suggested soya, of which some $7.5bn is imported each year from the USA, but the Chinese were at pains to state they had no intention of retaliating and instead vowed to fight the case through the WTO.

Even though Chinese steel pipe imports had dropped to 14% of the US market they no doubt still played a significant price-benchmarking role for consumers. With that option effectively removed from the market, or at least handicapped by double-digit duties expect pipe prices to rise in coming months. Indeed the discount on imported pipe has already reduced from some $50/ton to barely $10/ton now as volumes have been impacted by the anti dumping cases. Domestic producers didn’t have a lot to cheer the last 12 months but they should now feel the future looks a little better.

–Stuart Burns

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