Steel Mills

HARDI Members See Chaos in the Wake of Section 232

Written by Sandy Williams

The uncertainty surrounding the Section 232 national security investigation on steel has HARDI members worried about what the steel industry will be like if the ruling favors domestic steel mills and imports are sharply curtailed.

In the monthly steel conference call hosted by HARDI (Heating, Air-conditioning, and Refrigeration Distributors International), members talked about “chaos” and “fear” should new tariffs be imposed that remove foreign galvanized sheet products from the market.

Said one member, “I think the common theme here is that we are certainly in uncharted waters.” He added, “This is one of those 2004-2008 markets where who knows what could happen over the next three months. If you look at the market in terms of what we are used to seeing, it is hard to imagine what life will be like if there is a favorable 232 ruling.”

President Trump and Commerce Secretary Wilbur Ross have been adamant about their desire to stop the flow of steel imports, which they contend are unfairly traded and a threat to American jobs. Some observers believe Section 232 trade action is a foregone conclusion. Said a Midwest distributor, “Apparently Trump tells everybody that the steel people are going to be very happy soon.”

If a 20 percent tariff is imposed, it could effectively take importers out of the market. Some materials, such as galvanized .010-.012, are not widely available in the United States. Said one distributor, “If they put a 20 percent [tariff], we will probably call China for finished products instead of getting raw materials there.”

The HARDI executives expressed concern that finished products from China and elsewhere could flood the U.S. market. Said one, “We feel that what we currently have incoming foreign is in good shape. However, going forward, we are very cautious about anything we might source…. Depending on what happens with 232, we could very much see ourselves in competition with finished product.”

Distributors in Canada are watching the investigation in the U.S. just as carefully, concerned it may shift foreign steel northward. “232 will ultimately affect import pricing. If there are any additional duties put on, the importers will know they can raise the bar and still sell a lot of steel.”

Another Canadian distributor noted that Canada’s steel industry is pushing for a dumping case, which is putting traders on defense. “The offers coming are not coming as fast as they were, for sure,” he said. “What I am hearing is that the dumping case in Canada is close to happening, but they are waiting for the result of 232 because it may influence how they go about it.”

It is likely the Section 232 report will be delivered to the president later this week. An affirmative decision may take hold fairly quickly, said SMU Publisher John Packard, who said he was looking into whether the government is required to provide any lead time before implementing new policies. For example, will ships on water be given time to dock and get unloaded? At this point, it is unknown what kind of measures may be taken: increased tariffs, volume restrictions, additional duties, or import license fees, he added.

The HARDI members also discussed the pending circumvention case regarding steel being shipped from China through Vietnam. Said one, “One of the traders we speak with mentioned that he received direction to move Vietnamese steel sitting in the port in Houston to another foreign country. So, to me, that speaks to the fact they feel something in the circumvention suit will be ruled favorably to the domestic industry. I don’t see why else you would move Vietnamese steel that is already on our shores back off to another foreign country.”

Overall, the group agreed, current demand is good, but not great. Price increases announced last month by the mills appear to be holding. Some HARDI members said they increased their buying earlier than expected due to the increase. “Our June purchase was cheaper than our May purchases—at the same time they were announcing increases there was a willingness to negotiate,” said one distributor.

The price increase has not caused any of the competition from non-traditional competitors to disappear, said those on the call.

One of the HARDI members queried how the Section 232 investigation may impact prices. “I guess the thought is the mills will unleash who knows what kind of price increases, right?”

“I bet they will,” responded another, to the general agreement of the group.

Steel Market Update participates in a monthly steel conference call hosted by HARDI. The call is dedicated to a better understanding of the galvanized steel market. The participants are HARDI member companies who are wholesalers, service centers and manufacturing companies that either buy or sell galvanized sheet products used in the HVAC industry.

SMU Note: Tonight’s issue includes an article on Section 232 which discusses how soon it may impact the market.

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