Core Loss the Center of Grain-Oriented Electrical Steel Exclusion Requests

For large power equipment manufacturers, Section 232 comes down to two little words: core loss.

The GOES M3 Monthly Metals Index increased 1.1% to a value of 178 for December 2018.

Nobody explains the situation better than SPX Transformer Solutions in their Section 232 exclusion request for two grades of domain-refined GOES:

“DR-GOES is one of the most expensive materials used in the manufacture of power transformers, and its cost equates to 10-20% of the overall cost of a transformer…When SPXTS was using U.S.-produced DR-GOES, we were rapidly losing market share on LPTs [Ed. note: large power transformers] and SPXTS was at a decision point to stop producing LPTs in 2016.”

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The company went on to explain that by using low-loss steel from Posco at its Waukesha, Wis., factory, the company began to gain back market share from foreign large power equipment manufacturers.
The need for material with lower core loss rests at the heart of most companies’ exclusion requests. Of course Posco material falls under quota rules (South Korea) as opposed to the 25% tariff and so can come into the U.S. duty-free.
Meanwhile, AK Steel continues to submit objections to the exclusion requests claiming their material does meet core loss requirements. However, given the multiple exclusion requests coming from large power equipment producers challenging that assumption – and willing to pay more for foreign material – suggests those filing objections have a strong argument.

New Section 232 Exclusion Requests

 Meanwhile, Sumitomo has filed an exclusion request for domain-refined electrical steel, also arguing that they need this material because of its “domain-refining properties for all sizes of transformer cores, post anneal.”
Import data continues to support the assertion that large power equipment manufacturers depend upon Japanese-produced domain-refined grain-oriented electrical steel as Japanese imports represent the bulk of all grain-oriented electrical steel imports:

Source: MetalMiner Analysis of ITA Data
 In the meantime, according to a recent TEX Report, Japanese mills are offering prices in the range of $50-100 mt more in 2019 than in 2018, while U.S. producer AK Steel has requested a smaller increase. Meanwhile, Korean GOES imports to the U.S. will increase as the quotas for 2019 open. The producer to watch, however, remains Baosteel in China as the company will focus on higher-quality GOES materials with increased production capacity. Market participants will want to track if that material remains in China or shifts to exports.
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Exact GOES Coil Price This Month

The U.S. grain-oriented electrical steel (GOES) M3 coil price moved up slightly from $2,434/mt to $2,462/mt. The MMI increased two points from 176 to 178.
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.

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