Steel Products

Brazil and Other 232 “Quota” Countries May be Pushing Back

May 22, 2018

This morning, World Trade Online reported Brazil as “pushing back on Section 232 quota deal with the U.S.” I did some research on my own to see if traders associated with Brazil, Argentina or other markets that may have verbal agreements with the Trump administration regarding quotas were having issues due to negotiations with the U.S. being “cut short” as the U.S. was presenting the quotas as a “take-it-or-leave it” position.

The issue, according to World Trade Online, is that the Brazilian private sector wants entirely different quotas than those provided by the U.S. government.

decision SMU heard similar comments last week when one of our sources told us one of the new Brazilian slab suppliers was determined to ship as much slab to the U.S. as possible, regardless of what the other slab suppliers in Brazil were doing.

WTO reported this morning, “The Brazilian steel industry is hoping for a modified deal,” the source said, “because the U.S. needs semifinished steel from Brazil, so it makes no sense to restrict semifinished steel to the U.S.’”

SMU sources have told us, “What people do not quite understand is that no deal was finalized. If you go back to the Korean deal announced back in March and rules finally communicated on April 30, and I can tell you that the sellers of steel did not even know the rules on or around April 20. What makes you think that the Australia, Argentina and Brazil processes are any different?”

Our source continued with, “USTR is a busy entity these days. There are a lot of nuances to button up. USTR probably (but just a guess) prefers to use the same template as Korea, but not sure that each of these countries sees it that way.”

Our source told us that no one in the U.S. is going back to Brazil and the other countries to work out the details. “When Trump says there is an agreement, it usually just means there is a framework….”

With the Korean details now known, all of the other countries now know that they have to look at every detail before “signing on the dotted line.”

Later, our source added an important comment that all steel buyers, both foreign and domestic, need to heed: “Ergo my earlier comment regarding possible surprises on 232. I believe that all things will not work out as advertised. It is more likely that not all quota programs will work out, at least not by June 1.”

The June 1 deadline is a little more than one week away….