Steel Products Prices North America

CSN Navigates Troublesome Trade Waters

September 30, 2018

CSN continues to export slabs and coated steels to the United States, but tariffs and quotas make the market a challenge for the Brazilian steelmaker, reports a Steel Market Update source.

Earlier this year, Steel Dynamics bought the CSN conversion mill in Terre Haute, Ind. At the time of the purchase, the company had two operations: the Terre Haute mill and a trading operation that was importing steel from Brazil into the United States. SDI did not want the trading operation, so a handful of CSN employees stayed in their trading roles and continued to work for CSN importing Brazilian slabs, galvanized and Galvalume steels.

Brazilian Slabs

CSN Brazil is not a big player in exporting steel slabs to the United States. It continues to support the Terre Haute mill (now owned by SDI), shipping slabs into the United States, where they are converted at AK Steel to hot bands and then shipped to Terre Haute. There are no duties on Brazilian slabs, but the country does have a 3.5 million metric ton (3.85 million net ton) quota. Only 30 percent of the quota is allowed during any one quarter.

The quotas are troublesome for Brazil where there is no coordination between the mills or by the government to ensure a smooth flow of material, said SMU’s source. One company could use up the entire quota, for example. The quota for the third quarter was filled by Sept. 12. From that point, any Brazilian slabs arriving in the U.S. were put into a Free Trade Zone (FTZ) until the opening of the fourth quarter.

Flat Rolled Sheet (HR, CR, Galvanized, Galvalume)

Brazil faces antidumping and countervailing duties in the U.S. totaling around 30 percent on both hot rolled and cold rolled steel. The quota on these products, based on past import volumes, is relatively small since minimal shipments were made in calendar years 2016 and 2017. So, even though CSN is not subject to Section 232 duties, the mill is not taking orders on HR or CR coils, sources said.

In galvanized, Brazil has a quota of approximately 180,000 metric tons (198,416 net tons). CSN has been the primary supplier of galvanized in the past and continues to book GI orders. The mill reportedly has about 20,000 metric tons of material available for December shipment, but due to resistance from U.S. buyers, orders will be “underserved” and nowhere near full. U.S. steel buyers are skeptical of buying foreign steel with its extended lead times when domestic mill pricing is retreating by an average of $10 per ton per week, commented a CSN source. The spread between U.S. and Brazilian GI has been narrowing with Brazil quoting approximately $47.00/cwt CIF, Duty Paid, USA port for 0.033 G90 coils. As mentioned, Brazil will not reach its quota for 2018 on galvanized, but CSN believes it will fill the quota for 2019.

In Galvalume, Brazil has a quota of approximately 150,000 metric tons (165,346 net tons), which is also underserved and will not reach quota for 2018. CSN does anticipate being better organized to fill the Brazil quota for AZ during 2019.

The CSN trading operations are headquartered in downtown Chicago. SMU was advised that the company is looking to hire a Houston representative, an East Coast rep, as well as some customer service people to fill out the staff.