Letter to the Editor: New Trade Cases Are Not in the Steel Industry’s Best Interest

1. Two tier market pricing established – Market pricing for the past 10 years has been a gap of $80 to $100 per ton on import versus domestic pricing. This gap is market derived and for customers that: first, can use import, and second, can forecast 6 months out, it can result in a market savings. This gap has been relatively consistent for the past 10 years and is justified.

2. No injury – There is no injury to domestic mills. They are all relatively profitable and there have been no closures as a result of imports. (Sparrows Point, Wheeling Pitt, WCI, all closed within the past 5 years because of high costs, no modernization, poor locations, and a variety of extraneous reasons)

3. No dumping – China and India are exporting equal to the same costs that they are selling in their home markets.  This is transparent in several world market price indexes.  They are successful in exporting to the US because we have the highest priced steel market in the world.

4. Mills crying wolf again – about half of all trade cases are filed by steel mills.  The industry has cried wolf too many times, this time is no exception, and the mills credibility continues to erode at the ITC.

5.  No recent precedent with pipe trade ruling – The recent ruling on @ 15% tariff on Korean pipe and tube was justified, because there was a spike in volume, 96% of South Korea’s volume is sold in the US at prices that were reportedly $200 per ton under domestic prices and USS shut down two pipe mills demonstrating injury. Light flat rolled market circumstances are very different.

6. Jobs / Votes – the US manufacturing base has more jobs and votes and it is in their best interest that trade cases not be filed and new tariffs established. Newly created tariffs would not be pro job creation policy. This is a political issue and the politicians will vote in favor of no new tariffs on imported flat rolled, and the large steel intensive OEMs will heavily lobby to this effect.   The Steel Workers have not supported trade cases on flat rolled, because there are more union jobs to be lost in manufacturing if US steel prices continue to go significantly higher than world pricing.

7. Market balance – The US market historically needs 30%, or roughly 30 million tons, of imported light flat rolled steel products to balance supply and demand. The US mills are the biggest importers, as there are many converters and value added conversion by US mills — Calvert, CSI, Steelscape, AK, plus others are all melt short. The US mills threaten trade cases which disrupts the supply balance, increases prices and profits at the mills — this game has been being played for decades.

8. New low input costs – Iron ore costs are at or near 5 year lows and domestic mills have not commensurately lowered steel prices along with the rest of the world market.  This increased profitability will make demonstrating injury near impossible.

9. Recent WTO ruling – earlier this week the World Trade Organization (WTO) ruled against the United States and suggested that the U.S. was bending the rules when it came to Chinese OCTG and other products.

Summary opinion – trade cases will possibly be filed.  The psychological market effect from simply the rumor of filing the cases is a victory for the mills as the temporary effects are less import orders and higher domestic pricing.  The current USS price increase announcement and rumored higher price moves from others is evidence these rumors are already working for the mills.  If the mills were serious about winning the trade cases they would not be increasing prices / profits because proving injury will be much tougher. If new cases are filed and tariffs are approved on light flat rolled steel products, faith in our trade laws will be seriously eroded….

SMU Note: That is the opinion of one of our readers. We welcome yours. You can send them to: info@SteelMarketUpdate.com.