CRU: Steel trade protectionism is set to rise further

In the US, domestic steel prices are expected to continue to rise over the short term as costlier imports (i.e., because of the reimposition of Section 232 tariffs by President Trump) alongside upcoming mill outages in March and April will tighten the market.

Imports are expected to continue to flow into the US market, as the country depends significantly on imported supply to meet its domestic demand for some products, such as wire rod. In addition, supply chains have limited options in the very near term to switch over to alternate sources. Moreover, buyers, particularly for longs, are likely to try securing volumes before tariffs come into effect in March.

After Section 232 becomes effective on March 12, it is possible that we see even more import arrivals into the US as quotas on key countries will be removed, while domestic prices will remain elevated. In addition, producers in countries such as Turkey, Algeria, and Vietnam, who were not exempt from Section 232 before, will find themselves more competitive in the US market as all exemptions and exceptions granted to other countries are likely to be eliminated.

In the meantime, the flow of Brazilian slabs into the US market is also expected to continue. However, price rises for Brazilian slabs are likely to be limited as the tariff exemptions secured by the country previously are likely to be removed if a new deal is not negotiated ahead of the reinstatement of the tariffs in March.

Trade defense cases in the EU are expected to limit imports

In Europe, domestic steel prices are expected to keep rising in the coming weeks as restocking activity is likely to continue. In addition, the ongoing trade defense cases are expected to continue to limit imports, as trade policy changes in the US are likely to trigger stricter import restrictions in the EU as well.

The result of the ongoing anti-dumping investigation by the European Commission is expected to be announced on April 7, while the safeguard review is set to be concluded by the end of Q1, with any changes taking effect from April 1. The ongoing safeguard review could introduce individual country quotas instead of the current single quota system, providing further upside for European prices.

Turkish steel export prices are expected to trend higher along with the uptrend in European domestic prices. In parallel, the reimposition of the original Section 232 tariffs in the US presents an opportunity for Turkish exporters who will not need to compete with countries that have exemptions, given that all exemptions are expected to be removed.

Chinese steel export prices are expected to further weaken

Vietnam, the largest export destination for China, is set to impose temporary anti-dumping duties on Chinese HR coil imports. This development is expected to weigh on Chinese steel export prices in the near term. The upside risk to this is that the National People’s Congress and the Chinese People’s Political Consultative Conference meetings to be held in March are expected to come up with additional stimulus measures in light of the growing protectionism globally against China.

This analysis was first published by CRU. To learn about CRU’s global commodities research and analysis services, visit www.crugroup.com.