Steel Products Prices North America

CRU: Negative Ruling in U.S. Fabricated Steel Case to Weigh on Market

Written by Estelle Tran

By CRU Prices Analyst Estelle Tran, from CRU’s Global Steel Trade Service

The impact of the U.S. International Trade Commission’s surprising negative determination that allegedly dumped and subsidized fabricated structural steel imports from China, Canada and Mexico have not materially injured a U.S. industry is tough to define in the current protectionist environment.

Preliminary tariffs had been in place under the countervailing and antidumping investigations since July 5 and Sept. 3, 2019, respectively, so these trade barriers came at a time when domestic prices were falling. By that time, the trade war with China had escalated to the point where the U.S. imposed 25 percent tariffs on fabricated structural steel under a Section 301 investigation against China.

Fabricated structural steel imports from China, Canada and Mexico made up 20.4 percent of apparent U.S. consumption in 2018. The U.S. industry didn’t get an uplift from the cases against Mexico and Canada, as the duties were not high enough to stem the flow of imports. For Mexican companies, the lowest combined margin is 8.47 percent, and for Canada, one company has no dumping margin while all others have a 6.7 percent duty. For China the lowest combined antidumping and anti-subsidy duty was 81.45 percent—in addition to the Section 301 tariff. Imports of fabricated structural steel from Mexico and Canada increased modestly year over year in 2019, about 6 percent and 1 percent, respectively.

In contrast, Chinese imports fell by 44 percent y/y in 2019. This brought China’s share of U.S. fabricated structural steel imports from 36 percent in 2018 to less than 20 percent. In the absence of the antidumping and countervailing duties against China, imports of fabricated structural steel from China may rise again, as a 25 percent tariff could be overcome in times when U.S. pricing is strong. However, trade data suggests that Chinese fabricated structural steel arrives in the U.S. ex-duties at a similar cost to products from Mexico and Taiwan (China). It is not clear, therefore, where the commercial advantage lies in continuing to pay tariffs on Chinese product absent a large rise in prices from the U.S. or other offshore suppliers, so we could instead see an increase in fabricated structural steel imports from those other countries. The trade landscape in the U.S. can change unexpectedly, so time will tell if the U.S. and China will come to an agreement that would repeal the 25 percent Section 301 tariffs or if fabricated structural steel could be added to the list of products subject to Section 232 tariffs, as President Trump did for certain derivative steel products.

The negative ITC determination is surprising considering that affirmative antidumping and countervailing determinations against China, which the U.S. treats as a non-market economy, are almost a given. Furthermore, Canada imposed tariffs on many of the same products against China, Korea and Spain in 2017. We’ll learn more about the reasoning behind the 3-2 vote against imposing duty orders on fabricated structural steel on April 6; it would be interesting to see if the Section 301 tariffs imposed in 2018 against China worked against the petitioners, as they sought to prove injury.

The ITC’s determination is likely to be a negative for U.S. structural steel producers and fabricators. China may or may not reclaim market share with the cancellation of the antidumping and countervailing duties. But it is likely that other countries without the 25 percent Section 301 tariff will help to fill any void. In the short term, any additional pressure from China will probably not be felt until the Covid-19 situation settles and steel shipments return to normal.

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Estelle Tran

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