Stainless MMI: Tariff exclusion could lead to more capacity

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The Stainless Monthly Metals Index (MMI) rose by 1.8% month over month.

January 2022 Stainless MMI chart

Although nickel edged up slowly in price, it squeezed into a wedge that is susceptible to big time frame resistance. Prices continue to consolidate within an October-November 2021 high-low price range.

A continuation to the upside with more volume from the bulls could push prices even further. Lower volume, however, could lead to price breakdowns in Q1 2022.

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A&T Stainless petitions for tariff exclusion

U.S. flat-rolled stainless supply is expected to be constrained in 2022.

However, there may be some light at the end of the tunnel.

A&T Stainless, the joint venture between Allegheny Technologies (ATI) and China’s Tsingshan, has filed a new petition with the U.S. Department of Commerce for a tariff exclusion to import 304L and 316L hot-band coils from Indonesia.

In May 2018, Katie Benchina Olsen, MetalMiner’s senior stainless analyst, examined whether A&T Stainless should be granted an exemption. At the time, NAS and Outokumpu argued that they could supply slab to A&T Stainless. The exemption was denied.

The 2022 market is different because NAS, Outokumpu and Cleveland-Cliffs are all full capacity and have customers on strict allocation.

Approval would advance capacity

If the exemption is granted, A&T Stainless would restart the Direct Roll Anneal and Pickle (DRAP) line in Midland, Pennsylvania. The line would produce about 20,000 tons a month of thicknesses .048″ and heavier. If the DOC approves the request, the DRAP line would take several weeks to start up.

However, output would really depend on when the Indonesian hot band could arrive in Midland. If the slabs are already produced and ready for shipment, this means the hot band would arrive late in Q1 or early Q2.

A&T Stainless idled the DRAP line in July 2020 in a way that would allow operations to resume if market conditions changed.

“A&T has the opportunity to support the market, benefit from current market conditions and bring (100) employees back to work by restarting idled assets,” said Danielle Carlini, A&T Stainless general manager.

Although the U.S. flat-rolled stainless market desperately needs the A&T Stainless commodity 304 and 316L volumes, some industry experts believe that the exemption should be denied due to concerns over national security.

ATI produces many proprietary alloys used by the U.S. Department of Defense. The issue raises questions about safeguarding against the theft of intellectual property, as Tsingshan is known to be well entrenched within the Chinese government and the Chinese Communist Party.

Editor’s Note: In an emailed statement Jan. 11 following publication of this article, ATI commented on the tariff exclusion request:

“A&T Stainless’s request for a tariff exclusion has no implications on national defense,” ATI spokeswoman Natalie Gillespie said. “The joint venture seeks to import semi-finished materials produced in Indonesia, to be finished at A&T’s operation in Midland, Pennsylvania. There is no access or connection to ATI’s operations where specialized materials are produced. Additionally, the exclusion request is only for standard stainless sheet, commodity grades used in distribution channels, not national defense applications.

“There is no risk that militarily sensitive technology will be transferred to China as a result of the A&T Stainless joint venture. Our partner has no access to facilities, information or technology related to ATI’s support of the defense industry. No items for the defense industry are produced by the joint venture due to the commodity-product capability of the Midland plant.”

National security concerns may stymie approval

China has a history of being accused of stealing steel’s intellectual property.

In 2016, MetalMiner reported that U.S. regulators launched an investigation into complaints by U.S. Steel that Chinese competitors stole its secrets and fixed prices. The commission identified 40 Chinese steelmakers and distribution subsidiaries as respondents. That list included Baosteel Group, Hebei Iron and Steel Group, Wuhan Iron and Steel Co Ltd., Maanshan Iron and Steel Group, Anshan Iron and Steel Group and Jiangsu Shagang Group. U.S. Steel accused Chinese hackers of stealing proprietary data to manufacture and sell dual-phase 980, a high-strength automotive steel.

However, in 2017, U.S. Steel withdrew the claim, the Wall Street Journal reported. The firm cited an “’unbearable burden” pursuing the complicated international case without sufficient help from the government.

Actual metals prices and trends

The Allegheny Ludlum 304 stainless surcharge remained almost unchanged, with a 0.8% month-over-month rise to $1.24 per pound. Meanwhile, the Allegheny Ludlum 316 surcharge likewise held steady, with a nominal 0.6% rise to $1.75 per pound.

Chinese 316 cold rolled coil fell by 0.9% to $4,233 per metric ton as of Jan. 1. Similarly, 304 cold rolled coil held at $2,969 per metric ton. Chinese primary nickel increased by 4.5% to $24,165 per metric ton.

LME three-month nickel rose by 4.64% to $20,750 per metric ton.

Indian primary nickel increased by 3.6% to $21.31 per kilogram.

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