A Game Changer for the Domestic Steel Industry?
The OCTG trade injury cases filed against nine countries will go forward said the US International Trade Commission on Friday. The ITC found there is “reasonable indication that a U.S. industry is materially injured by imports of certain oil country tubular goods.”
The preliminary countervailing duty determinations are due on or about September 25, 2013 with the preliminary antidumping duty determinations to follow around December 9.
“The most significant issue in the steel business is the OCTG trade case,” is what one Midwest service center executive told SMU late last week after hearing of the ITC decision. He went on to tell SMU, “Outside of a few people no one knows what a big event this is. If you ask service centers in Detroit, Chicago or Cleveland they would have no clue what this means.”
SMU spoke with a trader who deals in OCTG and other forms of pipe imports from countries other than those mentioned in the complaint. He told us, “…after an affirmative ruling is published in the Federal Register approximately 5 ½ months after the filing, after which the importer will have to post a bond for each entry (import movement). However, that deadline can be extended by both institutions, up to 180 days or so. The petitioners (USA) can file a surge complaint, and if a surge is confirmed, the date at which it starts to hurt can be pushed back by at least 90 days and possibly more.”
In most cases, at the point when a bond has to be posted tends to eliminate shipments from the affected countries until the case is resolved. This could mean an extra 100,000-200,000 tons per month of hot rolled coil demand for the U.S. steel mills.
We heard from one manufacturer that there has been an increase in inquiries from OCTG distributors who have traditionally been aligned with offshore mills. They described buying as “tepid at best” as there was a rush to buy up imports that were “sitting at the docks” and unsold. However, Canadian drillers are becoming active and returning to the market as they prepare for the freeze in Canada (which makes movement of equipment easier). The manufacturer told SMU, “We expect better demand if imports are restricted. However higher gas and oil prices and more domestic consumption is what is really needed….”
Reaction from AISI and AIIS
The American Iron and Steel Institute (AISI), the voice of the domestic steel industry, applauded the ITC action. Thomas J. Gibson, president and CEO of AISI, said, “We are very pleased that the ITC has taken this significant first step in making a preliminary determination that these imports are causing material injury to the domestic steel industry. The U.S. laws against unfair trade exist to counter market-distorting practices – like dumping and subsidies — and to restore conditions of fair trade. U.S. companies and their workers deserve to have a fair shake and we applaud today’s vote as an important move towards providing U.S. steel producers relief from unfairly traded OCTG imports.”
From the AISI press release: Gibson said that imports from these countries have surged by 111 percent in the past few years. He noted that the volume of U.S. imports of OCTG from the subject countries soared from 840,313 net tons (NT) in 2010 to 1,771,320 NT in 2012. In the first quarter of this year, 425,987 NT of imports entered the market from the subject countries.
In response to the ITC announcement, the American Institute for International Steel (AIIS) emphasized again that the trade case is unwarranted and that “the trade laws’ purpose is not to protect profitable, growing industries.” The text of the AIIS announcement from August 16 follows:
“On July 2, AIIS decried the filing of trade cases by this profitable industry as ‘overkill.’ While AIIS, acknowledges that some overly aggressive suppliers had created an inventory overhang in the US market, the domestic OCTG industry is profitable, investing and growing its capacity in response to increased oil and gas drilling in the US. With this vote, the International Trade Commission commissioners ignored these simple facts and granted trade protection to domestic steel producers for at least a year, pending the outcome of the final decision on injury at the ITC next year. Put simply, this decision by the ITC can be expected to disrupt longstanding supply relationships and reflects an abusive use of the trade laws. With a profitable and growing industry in the US, along with growing demand for OCTG from all sources, domestic and imported, this is not an industry that needs trade protection,” said David Phelps, president AIIS.
“Imports have always played an important role in supplying drilling companies with OCTG and have played an important role in increasing production of energy and reducing America’s dependence on foreign oil. We are concerned that in using the trade laws to disrupt a number of legitimate, responsible and long term supply relationships, the ITC has allowed domestic industry OCTG producers to misuse the trade laws again. While most expect the facts should result in a no-injury determination at the final phase of the investigation at the ITC, this decision today will disrupt needed trade channels for over a year. Today’s decision again shows that the US’s trade laws are out of step with WTO obligations and are economically detrimental to American industry and the important jobs it creates,” said John Foster Chairman, AIIS.
The imported products under dispute are from India, Korea, Philippines, Saudi Arabia, Taiwan, Thailand, Turkey, Ukraine and Vietnam.
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