On Tuesday, the Department of Commerce announced that GOES products from China, the Czech Republic, Germany, Japan, Poland, Russia, and South Korea had arrived to the US at less than fair market value, e.g. “dumped.” Duties in the range of 5.34% against South Korean producers to 241.9% from some German producers will go into effect immediately.
Importers must pay deposits to US Customs and Border Protection for GOES materials from any of these countries. The domestic producers filed the case back in September of 2013.
Not coincidentally, one month ago this publication speculated that GOES prices would indeed begin to rise pending a decision by the DOC by the primary domestic GOES producers AK Steel and Allegheny Technologies.
However, prices have yet to rise (we may need another month or two to see the full effects of the impending dumping petition). This month’s index reading fell by three points to 212 on the back of slightly lower import prices. Meanwhile, the domestic producers have raised June surcharges, likely in anticipation of the dumping petition.
Transformers, Roll Out!
At the same time, small transformer producers remain subject to overall economic trends, in particular the housing market, and many (including the Wall Street Journal) have published rather alarming stories on the housing sector outlook for the balance of 2014. In particular, the Journal cites a 51% drop in mortgage originations and ITR Economics (a firm we follow from an overall macroeconomic perspective) cites declining affordability and slower household formation, which will lead to more sluggish numbers both in terms of housing starts as well as existing home sales.
When housing starts slow, stock transformer manufacturers take the hit. While economic data doesn’t help boost demand for GOES and NOES (non-oriented electrical steel), the dumping case has caused a silent exodus of stacked and wound core manufacturing to NAFTA countries. At the recent IEEE trade show in Chicago, attendees confirmed several companies have moved or expanded Mexican or Canadian core processing, cutting and slitting capability.
We suspect this migration of demand will begin to harm the US domestic producers in the form of lower volume.
At the same time, the M&A activity around French industrial conglomerate Alstom by both GE and Siemens has not gone unnoticed in energy circles. The French view GE’s intent with concern, primarily due to the American firm gaining both buying power on European soil as well as French loss of ownership of two key areas – clean energy/renewables, as well as high-speed rail, according to a recent Economist article. Any merger will further consolidate GOES buying power particularly for whoever wins Alstom.
Meanwhile, domestic producers AK Steel and Allegheny Technologies both offer GOES material to the Mexican market at a discount to US prices.
The monthly GOES MMI® registered a value of 212 in April, a decrease of 1.4 percent from 215 in March. US GOES coil saw a small decline this month, falling from $2,964 to $2,921 per short ton.
The GOES MMI® collects and weights 1 global grain-oriented electrical steel price point to provide a unique view into price trends over a 30-day period. For more information on the GOES MMI®, how it’s calculated or how your company can use the index, please drop us a note at: info (at) agmetalminer (dot) com.