International Steel Mills

US DOC Terminates Russian Hot Rolled Suspension Agreement

October 21, 2014

On Friday, October 16, 2014, the U.S. Department of Commerce terminated the Russian Hot Rolled Suspension Agreement. The agreement, which goes back to 1990 with numerous revisions over the years, covers all carbon flat rolled shipments out of Russia on the following ASTM numbers: A36 (plate), A568, A569, A572, A607 and A715. A few of these ASTM’s are outdated and have been replaced with A1011 and A1018. Essentially, the ASTM’s cover hot rolled coil and plate in commercial quality, structural and high strength low alloy grades. Slabs are not affected by this ruling.

The agreement expires on December 16, 2014 after which the Russian importers will be responsible to pay duties of 73.59 percent for Severstal and 184.56 percent for all other Russian producers. These duties should effectively remove the Russians from the hot rolled coil and plate markets.

Whether termination of the suspension agreement will result in higher domestic prices or more domestic mill orders remains to be seen. One of the larger hot rolled service centers told SMU, “I’m not sure of the effect. Longer term, the leading HRC import source and price leader is gone. All things being equal, this should lift the price of HRC imports. However, I think the orders placed with Russia were probably much lighter the last 2 months as the forward curve dropped down to 640 and below. So, shorter term we would have already baked in lower Russian HRC imports. We are looking at potentially less supply, so structurally higher prices.”

One of the domestic mills told SMU, “Overall good news, as it takes up to 1 million tons of annual import HR out of the mix. However, other hungry nations are poised to take that share of import, I fear.”

Looking at the data by product, since the beginning of calendar year 2014 the Russian steel mills have shipped a total of 328,184 tons of hot rolled coil or 12.9 percent of the total HRC imported into the U.S. from January through August (last month we have final census data). Total tons of imported HRC are 2,639,644 tons and besides Russia the largest exporters of HR coil to the U.S. are: Canada, South Korea, Turkey and Japan.

Over the past couple of months the Russian’s have been closer to 16 percent of the total HRC imports (in other words tonnage has been increasing).

In coiled plate the Russians have shipped 272,976 tons since the beginning of the year. This represents 20.3 percent of the total coiled plate shipped to the United States from January through August of this year. Total coil plate imports equal 1,346,440 tons through August. Russia is the second largest supplier of the product behind Canada.

In cut-to-length plate the Russians have shipped 36,315 tons since the beginning of this calendar year. The Russians have 3.6 percent of the cut to length plate import market. Total tonnage of cut to length plate imports through August are 1,012,648 tons and Russia is the 14th largest exporter of the product into the United States. The biggest exporting countries for cut to length plate are: South Korea, Canada, Brazil and the United Kingdom.