Trade Cases

Not Everyone Supports Antidumping Suits

Written by John Packard

A manufacturing company who requested that he not be quoted commented about the filing of Critical Circumstances by the domestic mills in the corrosion resistant (CORE – coated steels trade case) and its impact on their supply base. The points made by this OEM steel buyer need to be noted and discussed as the steel industry is a diverse community and not everyone agrees with the moves made by the domestic mills.

We will asked why should the steel traders who “legally” imported the steel be punished after already meeting all of the codes, paying any duties and other costs associated with the steels being exported from the affected countries (China, India, Taiwan, South Korea & Italy). This steel buyer asked why is it the trading community’s job to police a foreign mill’s cost structure (which they have no access to)?

If the purpose of the trade suits is to punish the offending countries why must the importer of record be the one to bear the penalty?

From an OEM (original equipment manufacturer) perspective the buyer told us that the domestic mills believe that they are entitled to own the U.S. market and they will protect it by locking out all others in the name of protecting American mill jobs. SMU was told that from the manufactures perspective the domestic mills seem to be saying that they will not stop filing dumping suits until such time when the U.S. manufacturers can no longer get a pound of steel from anywhere but the domestic mills (and at the price the domestic industry wants to charge) which will ultimately squeeze manufacturers margins and force them either out of business or off-shore.

In 2008 Steel Market Update attended Steel Success Strategies which was held at a time in the market when hot rolled prices exceeded $1000 per ton. That price may seem ridiculous to us now but at the time the domestic steel mills were confident that prices could continue to go higher. SMU can recall a situation during the conference where a mill CEO told the previous speaker (an automotive manufacturer) that they would pay whatever the mills told them. The market began to crash literally as people walked away from the conference and returned to their offices.

It is not just the manufacturing segment of the industry that is concerned about the flood of antidumping suits being filed (and threatened) but the service centers who supply the manufacturing companies are also concerned.

SMU spoke with the owner of a Midwest based service center who handled a number of contracts to supply steel to their manufacturing base. The trade suits are, “Awful for American manufacturing and bad for employment,” is how our conversation began.

He pointed out that commodity prices continue to move lower as are world steel prices. “Now the gap is opening up again,” he said. He pointed out that their manufacturing base cannot survive when the gap is extended as it was last year and into early 2015.

We were told that nothing has been decided yet and he pointed to a recent rebar case where the U.S. mills won the suit but the duties placed on the product were so low that it didn’t matter and the foreign rebar just continued to come into the country.

He went back to his opening statement and said, “My only concern is that it [dumping suits] are bad for our customers.”

We also spoke with a manufacturer who told us that his company has been preparing for the inevitable suits by trialing material from countries not named in the dumping suits. Vietnam was one in particular that has become active in the U.S. market. This company was determined to keep their plants here in the United States but, because they are located far from domestic producing mills they have to use foreign sources in order to remain competitive.

We heard from a large buyer of steel, both foreign and domestic, that the foreign mills are becoming concerned – especially with the filing of critical circumstances on coated products. This buyer believes that the foreign mills (and trading companies) will be much more careful about not exceeding the 15 percent rule which is used to qualify who is “surging” or not surging.

When asked if the foreign traders feel that the domestic mills will be successful with these new trade cases we were told, “I think most are concerned about it. The pulse check I did established around 60% feel likely success for US mills in these cases. Again, most of them feel the new language will be meaningful in helping them achieve this goal.”

There does not appear to be any panic in the marketplace and one of the reasons is the perception that demand is actually higher than what the order books indicate. However, there will come a time where the lack of foreign steel will help “kickstart” the flow of orders which, when it happens, will bring a major boost to domestic steel prices.

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