A quiet battle has begun to brew over steel imports and exports between Mexico and the United States.
The Commerce Department 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.
In Nucor’s latest quarterly conference call, CEO John Ferriola framed the broader issue this way: “Imported steel share of the US market was 25% in 2009 and has grown to 30% in 2013; and over the first two months of 2014, the share has reached an alarming 36%.” But that’s not because other countries produce steel more cost-effectively than the US (Ferriola would actually argue the exact opposite, that US producers have the lowest cost of production), but because products are dumped.
Mexican producer Deacero, however, argues differently.
According to Raúl Gutiérrez Muguerza, CEO of Deacero, all of the dumping cases will harm trade between the US and Mexico, according to a BN Americas story (subscription required), as they violate free trade principles. In addition, Deacero argues that only 4% of the US market for rebar comes from Mexico – and that US producers want to lay claim to all 100% of rebar market share.
Tit for Tat?
Back in September of 2013, the Mexican trade group that governs the steel industry, Canacero, of which Muguerza serves as a vice president, announced that its government would implement new import rules on 113 types of steel and steel products to minimize illegal imports.
More detailed specifics on the 113 products in question and the specific requirements appear here. Examining documents on the Canacero website reveals Mexico has faced its own share of steel dumping including materials of Chinese, Korean and Russian origin.
What This Means for Steel Buyers
In the short term, these two seemingly unrelated developments may not mean much for buying organizations, but this issue has the potential to escalate into a trade war. Buying organizations that rely upon imported Mexican steel may wish to consider alternative sources.