The U.S. International Trade Commission made a unanimous preliminary determination on March 25 that unfairly-traded imports of stainless steel sheet and strip are causing injury to U.S. stainless producers. The petitioners were AK Steel, ATI’s Flat Rolled Products Division, North American Stainless and Outokumpu Coil Americas.
The ruling was no surprise as the cold-rolled stainless steel anti-dumping and countervailing duties petition is one of many petitions being filed against Chinese products in recent months. What is surprising is that cut sheet has been included in the petition. The last cold-rolled stainless anti-dumping action filed in 1998 included only products in coil form.
The petitioners need to supply at least 25% of the U.S. market to claim injury. Only NAS and Outokumpu have cut-to-length lines, so it is impossible for the mills to have significant market share in cut sheets. Service centers process the lion’s share of cut sheets for the U.S. market. Unless the service centers are willing to be a party to the petition, I think cut sheets should be removed from it.
Since the cold-rolled stainless petition was filed earlier this year, Chinese mills have been canceling open orders with U.S. customers. No new offers are being made to the U.S. market. Domestic lead times for cold-rolled stainless steel are now well beyond eight weeks, with some products at over 12 weeks. Steel mills are in “controlled order entry” mode for Q2 in order to ensure volume for their key customers.
This means that if you do not have supply agreements with a particular mill, your requirement is subject to the capacity left after the commitments have been fulfilled. Second half bills of materials that are being quoted to service centers have base price increases equating to approximately $0.04 per pound. Domestic mills are capturing the opportunity to increase stainless base prices while China is under investigation.
Domestic Supply Tightens
Although base prices were unsustainably low at the end of 2015, many could argue that the mills are now being opportunistic with the U.S. cold-rolled stainless supply tight in the short term.
The supply of light-gauge, bright-annealed, polished and proprietary-grade stainless are the products impacted the most by the anti-dumping petitions, as MetalMiner reported last summer.
The product gaps will most likely be filled by POSCO (South Korea and Vietnam) as well as the mills from Taiwan. From Europe, Aperam, ThyssenKrupp Acciai Speciali Terni and Outokumpu are solid options for bright-annealed, proprietary grades and light-gauge stainless steel. Back-filling the supply chain will take some time, but when mills are three months out, it opens the door for imports.
U.S. mills need to be mindful of global pricing as they increase the U.S. base price. Increased demand is not driving U.S. base price increases. Supply is constrained because China, the number one importer of cold-rolled stainless, is out of the market and two domestic producers have shifted away from producing commodity stainless steel.
Abandoning Commodity Stainless
AK Steel has shifted away from the chrome nickel (austenitic) commodity market. ATI Flat Rolled Products has reduced its focus on producing commodity stainless steel in favor of higher value products such as titanium and high-nickel alloys.
The U.S. mills need to be mindful that metal buyers will continue to seek out the best value. Domestic mills have the natural advantage of short lead times due to proximity. When domestic lead times are the same as imports, metal buyers must take a hard look at the import option. U.S. mills must take note that if the importer successfully supplies U.S. service centers and manufacturers, this may be business the domestic mill may not win back easily.