No More Deals on S232; Up Next, CO2 Talks with EU: Steel Groups

The industry execs said that talks were now focused on other issues – such as a common framework with the EU for reducing carbon emissions, also known as the global arrangement, and on alleviating supply-chain issues stemming from the war in Ukraine.

Commerce and USTR did not respond to requests for comment for this article.

Section 232: Let’s Not Make a Deal

“They kind of struck their own deal in the last administration, with a quota arrangement, so renegotiating that is not a high priority for us now,” Secretary Raimondo told Reuters on March 23, in reference to South Korea.

Recall that South Korea, Brazil and Argentina agreed to an absolute or “hard” quota in order to avoid the 25% tariffs on steel rolled out by the Trump administration in March 2018.

“What the secretary said publicly is completely consistent with what everyone else in the administration is saying,” said Kevin Dempsey, president and CEO of the American Iron and Steel Institute (AISI).

South Korea has demanded a new deal on Section 232, one that would see its absolute quota replaced with a tariff-rate quota (TRQ), or “soft” quota, like those negotiated with the EU, Japan and the United Kingdom.

Under an absolute quota, no steel beyond certain specified amounts is allowed to enter the U.S. Under a TRQ, in contrast, amounts above that quota threshold can still come in but will be subject to 25% duties.

South Korea won’t get what it wants barring unforeseen circumstances.

“Everybody I’ve talked to in the administration has made it clear there is no interest in renegotiating the Korea 232 deal,” Dempsey reiterated.

That development is notable because South Korea is one of the largest foreign steel suppliers to the U.S. market and is a key U.S. ally in East Asia.

South Korea shipped 2.49 million metric tonnes of steel to the U.S. in 2021, making it the fourth largest import supplier behind only Canada (6.32 million tonnes), Mexico (4.32 million tonnes) and Brazil (3.96 million metric tonnes), according to Commerce Department figures.

Dempsey said his concern now is that the U.S. is importing too much steel.

Over the 12-month period March 2021 to February 2022, total and finished steel imports are up 50.1% and 53.1%, respectively, vs. the prior 12-month period, according to AISI figures.

“There is no doubt that there is a lot of steel coming into the U.S. market, and frankly I don’t think we need to be cutting deals to let even more foreign steel into the U.S.,” Dempsey said.

The most obvious candidates for a new deal would be Brazil or Argentina, the other two countries subject to a Section 232 quota. But “there is nothing in the pipeline,” said Philip Bell, president of the Steel Manufacturers Association (SMA).

“Nothing on Brazil, nothing on South Korea, nothing on Argentina. The focus right now is on the successful implementation of the three deals we’ve already agreed to,” Bell said.

He also praised Commerce Secretary Raimondo, U.S. Trade Representative (USTR) Katherine Tai and members of their staff for wrapping up three major steel trade deals, with input from the domestic industry, within less than six months. That’s a breakneck pace by Washington standards, Bell noted.

Up Next: A CO2 Deal with the EU

Dempsey and Bell agreed that the next big item on the steel trade agenda was a “global arrangement” on reducing carbon emissions.

The U.S. and the EU have given themselves two years from the date they agreed to a TRQ – or until October 2023 – to come up with a common set of rules on how to reduce CO2 emissions.

“The global arrangement is now being negotiated and they are really just getting started,” Dempsey said. The broad principles are not in question, but the details of how to implement them in practice are still up in the air.

Talks are bilateral. But a deal with the EU could then serve as a template for other countries looking to reduce greenhouse gas emissions, Dempsey and Bell said.

The SMA would also like to see USTR and Commerce focus on trade flows, particularly when it comes to raw materials that have been disrupted by Russian forces invading Ukraine and the ensuing war.

The posterchild for that problem has been pig iron, which U.S. mills had sourced primarily from Brazil, Russia and Ukraine.

But trade flows from Russia and Ukraine have been interrupted or stopped entirely because of the war. And the fighting has extended into the Black Sea, where cargoes from Russia and Ukraine had transitted routinely before the conflict.

By Michael Cowden, Michael@SteelMarketUpdate.com