US trade protection measures are as much a subject of debate for exporters to the nation as to industries aiming to protect their markets within it. Nat Rudarakanchana reviews a year in which US steelmakers saw a string of modest trade victories and ponders the outlook for 2018
US steelmakers scored modest trade victories in 2017, wrapping up a major trade case on rebar and seeing key determinations in a wire rod case, among other developments.
Late in the year, US steel mills also benefited from a favorable initial determination in a big US anti-circumvention case, which targeted cold-rolled sheet from Vietnam. That decision came earlier than expected, particularly since such cases lack statutory timeframes. The case, which implicates Chinese hot-rolled substrate, saw retroactive duties imposed, with a surprise announcement on December 5.
For long products, certain US producers wished for higher duties on Turkish rebar, in a case fiercely litigated by big US producers like Nucor and Gerdau Long Steel. After losing a similar trade case against Turkey in 2014, US mills this time scored mixed all-in margins of 8.19 % to 21.6%, with margins set in May. Some mills were disappointed with the margins, set by the US Commerce Department, at the time. Final duties fell far short of the 86.12% that US mills initially aimed for Turkey, though US steelmakers did win big margins against relatively minor exporters Japan and Taiwan.
But since May, Turkish rebar imports into the US market have declined dramatically, official US government data show. From June to December 2017, Turkey landed 199,199 tonnes into the US, down by a dramatic 77.36% from roughly 879,900 tonnes landed in the same period in 2016. Indeed, in July 2016, Turkey shipped some 200,700 tonnes of rebar to the US more tonnage in one month than the seven final months of 2017 combined.
The import decline is due to a combination of market factors high-priced Turkish rebar and competitive US domestic prices on top of the extra burden of duties, market participants have said.
For wire rod, US mills saw similar success, and arguably broader victories. In a landmark trade case filed in March 2017, US mills targeted 10 nations the biggest rod trade case seen since 2001, when the US targeted six nations.
In September, Commerce officials set final dumping margins of up to 756.93% against Russian rod, an eye-watering penalty. That triple-digit duty is the highest margin that certain industry veterans and lawyers have ever seen in a US trade case. Duties were effectively set at eight times the value of the imported rod.
This rod trade case, too, has effectively slowed imports from the countries targeted. In the second half of 2017, after the rod case was announced, total US rod imports fell to 587,231 tonnes over six months, down by more than 100,000 tonnes from the 693,200 tonnes imported in the second half of 2016.
As a result, US rod buyers are glum about the future of US import rod. Some US traders have drastically curbed rod trading, as the import rod market is expected to shrink in years to come.
It will be interesting to see the impact of this rod case on import arrivals in early 2018, said one rod buyer in early January, once the dust settles on Commerce verdicts. We havent really seen or done anything with import rod in a while, said this rod buyer, who used to regularly buy imports. I understand theres limited imports landing through March... And mills are predicting that when that tonnage dries up, their order books will fill up.
In flat-rolled products, a major US steel arena, market participants have kept a watchful eye on the US anti-circumvention case against Vietnam, formally initiated in November 2016, just one day before President Donald Trumps unexpected electoral victory.
Whatever the outcome, the implications of the final decision will be far-reaching. If Commerce officials rule in favor of US mills, then steel substrate across several products and countries could be at risk, potentially targeted by fresh anti-circumvention cases.
But if officials rule against US mills, then this could signal reluctance among US officials on broadening trade restrictions. Few are certain of the outcome, with much legal debate centering on the topic of substantial transfor-mation, a key legal concept in the case.
In their preliminary decision in early December, US officials indicated they could side with US mills, and expand the scope of trade sanctions in coming years. Commerce imposed duties as high as 522.23% and said Vietnamese steel effectively circumvented US duties, though the decision must be further finalized.
A final decision in the case is set for February 16, 2018, which makes the case a key agenda item for early 2018. Mirroring effects from the more traditional anti-dumping and countervailing cases on long products in 2017, imports from Vietnam dropped dramatically in 2017, after the anti-circumvention case appeared in late 2016.
US producers like U.S. Steel Corp called the affirmative Commerce decision an encouraging sign. Others, like Morgan Stanley analyst Piyush Sood, noted that a successful anti-circumvention case could prompt further steel trade cases, raising both physical steel prices and steel share prices.
The headline trade cases come amid other adjustments in the US trade landscape in 2017, including a major revision in Korean oil country tubular goods (OCTG) duties. South Korea is the largest offshore supplier of OCTG to the US, though the country has faced
a barrage of trade actions in recent years.
In a routine yearly review, US officials raised duties on Korean OCTG imports, in some cases doubling duties or by even more, in a decision made in April. A further, separate review, with preliminary results revealed in October, indicates that stiffer penalties could come in 2018.
Like most trade actions, the US decision on Korean OCTG unsettled market dynamics and sparked knock-on effects. In this case, US tube makers were perhaps vexed at the outcome and market impacts, which had a perverse effect from the point-of-view of US producers. In fact, Korean producers started exporting line pipe to the US instead, after they were locked out of OCTG markets.
In turn, that sparked rumors of an impending US line pipe case, which could target both Asian exporters and companies outside that region. Those rumors heated up in late November, as line pipe imports swelled in late 2017, further unsettling market participants and swaying market behavior. Big line pipe exporters to the US in 2016 included South Korea, Germany, Greece, and Canada.
Other big trade rumors in 2017 centered on US fabricated beam imports, as steelmakers like Steel Dynamics Inc highlighted a problem in that arena, plus a potential Ukrainian suspension deal on wire rod, which failed to take off.
In downstream and steel-related products, US producers filed cases on cold-drawn mechanical tube and concluded a plate trade case, which was mostly conducted and litigated in 2016. In the latter case, the US won penalties against several exporters and countries, including Asian and European nations, in May.
In other metals, headlines centered on a Section 232 case filed on aluminium, in late April. That came months before a probe self-initiated by the US government, on aluminium sheet from China a rare strategy since most trade investigations are filed by US companies, and not governments.
For 2018, all eyes are set on President Trump. His administrations biggest banner move on trade is arguably the still-pending Section 232 investigation on steel. That case, an unconventional and controversial trade tactic, considers whether steel imports into the US undermine the countrys national security.
If so, penalties from tariffs to quotas to a combination of the two may be warranted, and can be single-handedly imposed by the president, without Congressional approval.
Statutory deadlines for the investigation loomed at the time of writing in mid-January. But there is increasing talk that deadlines may be ignored, with the contents of any US Commerce Department report kept secret, for now, as has happened in past 232 investigations. But if Trump makes good on campaign promises to protect US rust-belt workers, and imposes import barriers, this could spark the biggest waves in the market since 2002, which was the last time sweeping US import barriers were erected.
Theres just huge uncertainty around the 232, said one rebar fabricator in late December, citing that and industry consolidation as two market factors swaying his purchasing lately. These are major market ramifications, and you dont know how short-term or long-term their impacts are going to be, he added, voicing frustration.
With the 232, if sanctions are announced, there are definitely going to be long-term implications, he said. But for the short term, one simply does not know how to plan future business around such unknown impacts, he said.
The inability to predict supply-demand trends as little as three months out has weighed on market participants across steel since Trumps election, both in 2017 and 2018 to date. Even metals professionals who back Trumps administration have complained of this uncertainty, while some steel mills have protested about the perverse, and sometimes adverse, effects of Trumps rhetoric on market trends.
Other big ticket items in 2018 include US renegotiations in trade pacts, especially with Korea and the wider North American region. The US is renegotiating its free trade pact with South Korea, known informally as the KORUS FTA, with initial talks held in January. South Korea was the third largest exporter of steel to the US in 2016, ranking lower than only Canada and Brazil that year, while it is consistently a top-five steel exporter to US shores.
Trumps administration is also renegotiating the North American Free Trade Agreement (Nafta), a deal which Trump has repeatedly vowed to scrap. Mexico and Canada are the two biggest homes for US steel exports, a fact that has led US steel interests to urge the conservation of Nafta.
The outcomes of both renegotiations are uncertain, market observers say.