On Monday we reported how US cold-rolled coil producers were rightfully concerned about products that originated in China being dumped in the US. South Korea, a state that China exports large quantities to, took the number 1 spot for CRC imports to the US in January. This follow-up article deals with the situation in the hot-rolled coil market.
The cold-rolled coil data suggests China, at least based on January numbers, has not served as a top 5 exporter to the US. However, a Wall Street Journal article mentioned, “that US steelmakers allege a similar practice, saying that China often ships steel to South Korea for processing before it gets moved to the US.”
And lo and behold, Korea takes the number 1 spot for HRC imports. It might be worth examining Korean CRC prices to conduct a similar analysis.
The data on the HRC side certainly appears compelling in terms of import values. In other words, based on the arbitrage dollar amounts (or percentage of the domestic price), we’d expect to see significant Chinese imports – and we did!
Price Trends Don’t Show Dumping (Yet)
What the data doesn’t tell us is whether products have been dumped – only that the conditions appear ripe for more Chinese exports to come to the US.
Conditions 1 and 2 of the definition of dumping (home-country demand vs. the amount of domestic capacity and price trends in the home market vs. price trends in overseas markets) suggest the massive Chinese over-supply situation combined with the price arbitrage between the two countries means we would expect to see growing import levels.
And indeed, that appears to be happening – look at 2014 average import levels for all steel products:
The proof of the Pudding is in the Tasting
To put it another way, the proof of the steel price is on the invoice. What we can’t tell by examining our data, or the data coming out of China, is what price appears on the commercial invoice – the home market price or a price below the home market?
If, indeed, the Chinese are trans-shipping to South Korea to obfuscate actual Chinese exports to the US (as the domestic producers allege and which we know, from personal experience, is a common practice), then how confident are we that metal isn’t indeed being “dumped?” The definition is this: domestic producers need to show that products sold into the import market are sold at below home market price levels – a challenging task to prove, to say the least.
Undoubtedly producers are keeping close tabs on steel imports. US service centers currently importing steel flat products from China may wish to pay close attention to China home market vs. US price levels. Conditions indeed may be ripe for anti-dumping claims!