International Steel Prices

CRU: Dramatic Drop in U.S. Steel Prices Makes Imports Uncompetitive

Written by Estelle Tran

By CRU Prices Analyst Estelle Tran

U.S. steel sheet prices have fallen faster in early Q4 than initially expected, as lower demand levels, economic uncertainty and another $30-40 /l.ton decrease in scrap prices in October guided steel prices down. The CRU Midwest HR coil price assessment on Oct. 16 was $507 /s.ton, down $64 from $571 /s.ton on Sept. 18. Declining domestic HR coil prices have made most offers for imported material outside of the NAFTA region unattractive, even from South Korea, which has no Section 232 steel tariff. Sources contacted said they did not have new import numbers for sheet because they viewed the spreads to be unattractive.

The GM strike by about 48,000 union members is dragging into the fifth week, and analysts have estimated that the strike has cost GM nearly $2 billion in lost profits. The strike has contributed to a slowdown in business for companies that support the automaker and comes at a time when the manufacturing sector is slowing down. Sheet mills that heavily supply the auto industry have been heard in the market with more spot availability as well.

U.S. to Hike Tariffs on Turkish Steel

Just as Turkish steel was on the cusp of becoming workable for U.S. importers, President Trump announced that he would hike tariffs on Turkish steel back up to 50 percent from 25 percent as part of the sanctions related to Turkey’s “destabilizing actions in northeast Syria,” according to a statement. Prior to the news of tariff increases for Turkey, there were some Turkish rebar bookings to the U.S. The material booked for January arrival was priced in the low-to-mid $28 /cwt range on a loaded truck basis in Houston, a distributor said. Turkey was even trying to raise prices earlier this month because of the slight increase it paid for scrap. Distributors said that offerings from Italy and Portugal have not been as competitive, and with domestic prices still under pressure from scrap price declines, imports will continue to be subdued.

Mexico Renews Import Tax

In September, Mexico once again renewed its import tax on nearly 200 steel products, but this time it outlined a path for de-escalation. The import tax of 15 percent will fall to 10 percent on Sept. 22, 2021, and then 5 percent in 2023 before ultimately being eliminated on Aug. 22, 2024.The duties meant to protect the Mexican steel industry have been in place and renewed almost continuously since 2015. The previous yearly deadlines to renew the tariffs created uncertainty in the Mexican market, so this longer-term plan at least gives stakeholders a better understanding of the competitive landscape.

One major development in Mexico’s new steel tax plan is that it will include slabs for a trial period of 180 days. The government said it would monitor the market and determine whether to add slabs to the list of taxed products for a longer timeframe. If Mexico opted to tax slabs long term, it would be damaging for Ternium, which is dependent on slab imports from Brazil.

The tariffs for the last few years stemmed the flow of long products into Mexico, though supply chains for flat products were largely unaffected because the main exporting countries—the U.S., Japan and South Korea—have trade agreements with Mexico. Mexico’s local sheet production capacity is insufficient to meet demand, however, in the next two years, there will be substantial capacity added in Mexico and the U.S.

U.S.-China Trade Negotiations Progress

The U.S. and Chinese have agreed—but not signed—to “phase one” of a trade deal that will put a stay on escalating tariffs for now; the U.S. was set to increase tariffs on $250 billion of Chinese goods to 30 percent from 25 percent on Oct. 15. Though the details have not been finalized, China has agreed to purchase between $40 billion and $50 billion in U.S. agricultural products.

Observers are still skeptical of this informal agreement, and we are not seeing progress to the point where tariffs may come off. No progress has been publicized regarding the latest set of potential 15 percent tariffs on about 60 percent of a list of $300 billion in Chinese products. These tariffs are set to take effect Dec. 15.

Brazilian Slab Margins Squeezed

Brazilian slabs have fallen significantly, as buyers internationally refused to accept higher prices as they saw finished steel and steelmaking raw materials decline. The October Brazilian slab assessment was $385 /t FOB port, down $50 from $435 /t in September. U.S. buyers are attempting to push prices down to $375 /t, but Brazilian producers say if prices fall further, margins will fall too low and they will have to reduce supply.

In September, Brazilian slab exports to the U.S. fell by 37 percent m/m and were also down 69 percent y/y. Overall exports were also lower in September and year to date. Maintenance work at local mills has increased domestic demand for merchant slab this year, and sellers have preferred to sell domestically because of the small premium they have been able to capture over export prices.

Outlook: Negative Pricing and Demand Outlook has Buyers on the Sidelines

U.S. steel market participants have been negative about their outlooks for pricing and demand, particularly as we move into November and December. With scrap prices expected to be flat in November, there is no expected catalyst that will help to support prices in the near term. Until sheet prices find a bottom, buyers will remain hesitant to place orders from domestic mills as well as imports.

Brazilian slab prices are expected to remain under pressure, as we do not expect a rebound in finished steel prices in November. There is some optimism among slab producers that prices may tick back up in negotiations to the U.S. for the Q1 Section 232 quota allotment. 

Explore this topic further with CRU.

Estelle Tran

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