Steel Products Prices North America

Steel Dynamics: No Trade Case on Cold Rolled or Coated Right Now

Written by John Packard

Steel Dynamics admitted in their conference call with analysts earlier today, that the timing is not right for a trade case against cold rolled and coated steels (the question asked was about Chinese the answer did not reference any specific country).

We thought our readers would be interested in the complete dialogue between two of the analysts and Dick Teets of Steel Dynamics on the subjects of possible trade cases as well as what just happened regarding the US DOC termination of the Russian hot rolled suspension agreement. The conversation below was taken from the Bloomberg transcript of the SDI earnings conference call which was held this morning (October 21, 2014):

Question: Evan L. Kurtz: I just had a question on trade – trades and cases, I saw the Russian suspension, elimination this morning, that was a nice positive for the industry. But also, one thing when we’ve heard a lot about towards the end of the summer was that there is a potential for a trade case to be filed on Chinese cold rolled and coated products, and I’m sure you guys probably were involved in that, but we haven’t seen anything, and I just wonder if you can perhaps provide an update on that, what’s going on with that one?

Answer, Dick Teets, Steel Dynamics: Well, I would just tell you that, we are constantly monitoring the imports. We’ve done investigations. A number of our competitors along with ourselves have worked together through our attorneys to do the investigations post-domestically and in the foreign countries to determine what’s the domestic pricing are of those countries that we believe are guilty of dumping and flooding our shores. But we don’t believe along with our legal counsel that the timing is correct at this moment for a successful case, but that may change as the markets change. And so, we’re constantly vigilant and ready to go at upon a discussion and enough agreement amongst our parties, that we’re ready to do it. So, we’re vigilant I guess the best way to say.

Dick Teets: And I think the general sentiment as a trade commission, I think has turned positive towards our industry. If you look at the, obviously the recently ruling on the Russian suspension of duty issue that obviously helps us, helps the industry and I think in particular helps Columbus in the Southeast markets. You’ve seen the industry won the Korean OCTG ruling and they’re filing for – industry is filing sort of a welded line pipe case against Korea and Turkey. And I think this bodes well for us. It supports, I think our sentiment that in the next year or two the countries were to be constrained on hot-rolled coil and give some very, very positive market dynamics.

Evan L. Kurtz: Great, thanks. And then one other question on imports. One thing we’ve been hearing is that because of the rail issues and higher trucking rates and higher barge rates, that there’s been a lot more regionalization of pricing in the past several months. And I was wondering if you can kind of confirm that, I mean now that you’re actually both in the South and the Mid West, are you seeing a big discrepancy in hot-rolled pricing and around let’s say the Chicago area versus some of the more coastal regions in the south?

Dick Teets: I think that given steel is a freight sensitive commodity, obviously closer to the supply, you’re going to get better pricing. And right now, you had a lot of rush, I think material coming to Houston. So that suppliers down there, you definitely going to get that freight differential. Fortunately, our Butler facility is Midwest, it’s a reasonable distance from the coast and we’re not impacted quite as much as many of our customers – competitors I would say.

Question, Tony B. Rizzuto: What about when you guys mentioned the Russian suspension agreement obviously we’ve seen that coming out obviously a positive for the industry. I guess I was a little bit surprised how quickly the discussion kind of came together. There was a lot of talk about a review process that was not expected to be completed until maybe in the first quarter next year. Wondering how you feel about that and obviously this should be helpful – particularly should be helpful to you guys as you increase your exposure in the Southeast. How do you tend to look at that?

Answer, Dick Teets: Given Russia is one of the largest importers of hot-rolled coil. Constraint in them is obviously I think a big benefit to our industry. As I said earlier, it’s a only a huge benefit for our Columbus facility that trades in the Southeast arena. And I’m not so sure we know what happened behind the scenes obviously American, Russian relationships are not – sound the best and maybe that accelerated it.

Dick Teets: Just for the record, we’ve been petitioning the commerce department for months. We’ve been signing documents and submitting records to them since midsummer and so it – we were disappointed with how slow it was going in midyear. And so wanting – and the signals we were getting were disappointing. So this unexpected year end moment is basically a catch up to me. So I am pleased with the performance so that of the Department of Commerce and so it appeared to be fast but it’s been in works for a quiet a while….

Tony B. Rizzuto>: It’s interesting because I was in Australia recently and I was talking to some of the big iron ore miners over there and I was asking them the questions about how they felt about possible trade loss against the Chinese in steel and they seem to hint that there was much greater sensitivity to that by a steel makers on other countries and this whole thing obviously Russia and the sentiment against what’s going on for obvious reasons. I think that’s a key point here. Can you make any comments about, is there some increased sensitivity on the Chinese front? Is that why you made the comment earlier that it’s just not the right time and maybe if you could elaborate on that a little bit more because we haven’t seen obviously those trade cases follow-up much rumored. But it’s not the right timing. Maybe a little bit further expansion on that might be helpful.

Dick Teets: I would just tell you that we had to look at all the possible participants in any trade case we’ve to look at our – the government looks at a lot of parameters including your financial performance and your order intake what your sales prices have been again the documents as to what the wholesale prices have been in both in their originating countries as well as here. And so, when you take a broad brush approach to it, all that has to considered, then you start gleaning out of the whole field, is to which countries may or may not be suitable for a case.

And if you have to eliminate, too many of those countries, and too many of the tons, it’s sort of plays against you, and you want to make sure that you have a, – you don’t want to keep going back to the well, for small pickings let’s say.

So, you want to make sure, that you have a deliverable, number one, and then number two, that it’s a worthy one. So, we are watching it, and we have our data, and we will continue every quarter, to refresh that data.

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