Trade Cases

Steel Quotas in the Cards for Brazil?

Written by Sandy Williams

Steel quotas may be in the cards for Brazil as it attempts to negotiate its way into a permanent exemption from the 25 percent steel tariffs scheduled to go into effect on May 1.

U.S. Commerce Secretary Wilbur Ross reportedly told Brazil’s Minister of Affairs that the quickest way to win exemptions would be to agree to voluntary restrictions on exports and the establishment of quotas.

Marco Polo De Mello Lopes, president of the Brazilian Steel Institute Aço Brasil, said that the U.S. appears to be signaling it will impose quotas on particular products, which would require the steel sector to set limits for each company.

Most of Brazil’s imports to the U.S. are semifinished steel products such as billets and slabs. According to the U.S. International Trade Administration, the U.S. imported 50 percent of its semi-finished steel products from Brazil in 2017, a total of 3.8 million metric tons.

“The U.S. is not self-sufficient in slab,” said Lopes. Curtailing exports will hurt those U.S. steel producers who depend on Brazilian slab shipments.

Brazil’s steel sector is expecting an 8.6 percent increase in production this year. Domestic sales are forecast to increase 6.6 percent and exports 10.7 percent.

“Depending on the outcome of the negotiations with the United States, obviously this number can have a very large impact,” said Alexandre de Campos Lyra, chairman of Aço Brasil. “One third of the exports are destined for the U.S. market.”

The Institute expressed concern about safeguard measures implemented by the European Union to protect its domestic steel industry from a flood of exports diverted from the United States.

“We are experiencing a monumental turbulence because of the absurd excess of steel capacity in the world,” said Lopes. “All nations are protecting themselves like the United States.”

The Brazilian steel industry is still trying to recover from a severe economic crisis. According to data from the Aço Brasil, industry performance improved in the first quarter of 2018 with domestic sales up 11.4 percent from the same quarter in 2017. Steel production was 8.6 million tons, a 4.9 percent increase from a year ago.

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