Steel Mills

NLMK’s Miller: ‘Slabs Need to be Carved Out’

Written by Tim Triplett

As a multinational business with a plant in the United States, should NLMK USA have a right to import slabs tariff-free from its parent company in Russia over the objections of domestic steel producers?

The Trump administration maintains that steel imports, including Russian slabs, are a threat to the U.S. steel industry and thus national security. Leading domestic steelmakers U.S. Steel and Nucor support that view and were among the objectors to NLMK’s request for an exemption from the Section 232 tariff.

NLMK argues that the domestic steel industry does not have the capacity or the willingness to provide slabs to NLMK in the quantity and quality it needs to remain in business. The tariff on its imported raw material makes its U.S. operation uncompetitive and threatens its very viability, claims Robert Miller, president and CEO of NLMK USA. Miller responds to questions from Steel Market Update in the following edited Q&A:

SMU: Will NLMK USA have to be shut down if your company has to absorb the 25 percent tariff on slabs?

Miller: “Fortunately, the pricing in the domestic market has risen mostly because of a robust economy and good steel demand. We continue to order slabs from all suppliers and pay the tariff as required. To date, we have paid in excess of $90 million in duties. We all know that this market cycle will begin to fall at some point. That remains a point of concern because margins will tighten and NLMK will not be able to achieve positive margins on its business. Today, nobody is certain when this market will lose its legs.”

SMU: How many exclusion requests has NLMK USA filed?

Miller: “We have filed 85 exclusion requests covering all combinations of sizes and grades that we have ordered over the past 20 years.”

SMU: How much work and expense did it take to file for these exclusions?

Miller: “The work needed to defend our business model, and to make sure that the administration, Commerce, Congress and the Senate understand the facts, is extensive. The lawyers necessary are not cheap. I’ve spent way more time in Washington than I care to. We would certainly rather use our resources to focus on improving our business and being a reliable supplier to our customers.”

SMU: Why do you believe Nucor filed an objection, even though they don’t produce slabs for the resale market?

Miller: “In 20 years of buying slabs, we have not purchased any slabs from Nucor because they do not make slabs for resale. Their slabs are too thin and their production process is not capable of thick slab manufacture. Their actual objection admits to this point. I don’t know why they filed an objection. In my opinion, it was purely for anti-competitive reasons since they have no ability to provide a substitute product to help us. Also, we have to remember that the slab reroller model is a viable model and is a recognized part of the steel manufacturing base in the USA. Collectively, the model accounts for 15 percent of the flat rolled supply in the U.S. and supports 35,000 direct and indirect jobs. To support the demand in this country, which is currently capacity-short, the steel-consuming market needs our model to remain competitive.” 

SMU: U.S. Steel also filed an objection to your exclusion request. U.S. Steel could provide slabs to domestic slab buyers. In fact, NLMK has purchased slabs from U.S. Steel in the past. Why do you believe U.S. Steel could not meet your slab needs today?

Miller: “NLMK needs about 200,000 tons of slabs per month. We have had periods when we purchased domestic slabs, but never at the quantities to support our whole business. Today’s landscape has changed. U.S. Steel’s slab-making capacity has been rationalized over the years. The integrated producers that manufacture slabs have more rolling capacity than steelmaking capacity. If the demand exists for finished coil, they would much rather roll the slabs they make and sell value-added coils. In ArcelorMittal Calvert’s filing for a slab exclusion, they confirmed there is no merchant market in the USA for slabs. Even though they make slabs, they need additional sources of supply to support the demand for their products. We have bought U.S. Steel slabs before and we will continue to attempt to fulfill our needs domestically. But they simply do not exist in the quantities necessary and at reasonable prices to remain competitive. What’s their incentive to keep NLMK or any other slab purchaser competitive?”

SMU: Has the Department of Commerce exclusion process been fair to NLMK and others who are requesting exclusions?

Miller: “The process is picking winners and losers. At $90 million and counting, NLMK is the poster child for tariff payments, and it is unfair we are not able to compete on an even playing field. It’s harming our business, our 1,200 employees and our suppliers. It’s clear to all that our raw material is not available domestically in reasonable quantities. Slabs needs to be carved out, and an exclusion should be quickly granted.” 

SMU: Are you unable to fill orders for your customers right now due to the lack of specific slabs?

Miller: “Currently, we continue to secure slabs from global producers. The majority is from our parent in Russia where the tariff applies and the balance from suppliers where a country exemption is in place. We are currently in good shape with supply and continue to be a reliable supplier to our customer base. I expect that to continue short term, but we need an acceptable decision from Commerce to resolve this issue long term.”

SMU: Do you feel the objections by U.S. Steel and Nucor were more about controlling competition than they were about the availability of slabs here in the U.S.?

Miller: “I think everyone knows that slabs are not available in the necessary quantities in the USA. I’ll let you determine their motives.”

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