US flat-rolled sheet producers on their road to recovery
OREANDA-NEWS. August 23, 2016. US sheet producers saw the culmination of many months of work as the US Department of Commerce released its final determinations of countervailing and anti-dumping duties against hot-rolled coil (HRC) imports, the last of the three major unfair trade cases on sheet steel.
The duties in the other two cases, on imports of corrosion-resistant sheet (coated sheet) and cold-rolled coil (CRC), were finalized earlier in the summer. However, they were not overnight decisions and were also years in the making, from evidence gathering, legal consultations, filings, hearings and deliberations. This road to recovery for US sheet producers has been long and arduous, spanning the last two and half years, and it’s not over yet.
In fact, the US International Trade Commission (ITC), which has already sanctioned most of the CRC and coated sheet duties with affirmative injury rulings, must make final determinations in the HRC case, due September 19 in the dumping portion of the case and October 18 in the subsidy cases against exporters in two countries.
Looking back at a presentation given at the S&P Global Platts Steel Forum in New York City in 2014, one of the slides addressed “potential” trade case action by US sheet mills. There had been nothing filed yet for any flat-rolled products at the time but US market participants had already been discussing it for months. The ongoing sentiment in the market from anyone who wasn’t a producer was, “I will believe a trade case when I see one,” as rumored filing dates came and went without action by the mills.
The issue shifted from market chatter of specific possible high-volume targets, such as India for its exports of light-gauge corrosion resistant material, to targeting a wide range of countries across the spectrum of sheet products. It wasn’t until almost a year later that US producers filed their first petition to the ITC and US Department of Commerce — against coated sheet imports from five countries, on June 3, 2015. A petition against CRC imports from seven countries was filed almost two months later, on July 28, and following on its heels was an August 11 filing against imports of HRC from seven countries — the case for which Commerce recently set final duty margins.
Leading up to the trade case filings US mills were also working on another front, lobbying the government to change the criteria for a finding of “material injury,” making it easier for producers to file and win cases. In June 2015, President Obama signed into law two pieces of trade legislation US steelmakers believed would help open new markets and improve their ability to battle illegal imports: Trade Promotion Authority (TPA) and Trade Preferences Extension Act. The definition of “material injury” was retooled, reducing the burden of proving injury sustained by unfair trade practices.
The final sheet duties eventually levied varied, received mix reactions, and will have far-reaching impacts on the US industry for years to come. To start down the rabbit hole of what each decision, for each country, for each product, means for the US industry — not to mention the exporting mill and its US customers — would be a fool’s errand in a blog post with such limited space. However, the main impacts in the cases resulted from prohibitive duties placed on Chinese coated sheet and CRC imports. (Chinese HRC was already subject to prohibitive duties).
Of the five countries named in the coated sheet case, Chinese volume in 2014 (the peak year for imports) totaled 861,200 mt, 41.4% more than the second-largest coated sheet exporter to the US, Taiwan. China also was knocked out of the US CRC market after 2014 peak exports to the US of 792,300 mt, up 226.5% from their 2013 CRC exports to the US, Commerce and US Census Bureau data showed.
This past June, imports of Chinese CRC totaled just 13.9 mt, according to that government data, and imports of Chinese coated sheet and narrow strip totaled 95.5 mt.
The US mill recovery (at least on a pricing basis) can’t be attributed solely to the filing of trade cases. There have also been major domestic mill supply cuts — at US Steel’s Granite City, Illinois and Fairfield, Alabama mills and AK Steel’s Ashland, Kentucky operations — which have helped put the US supply/demand situation closer to equilibrium.
This recovery for US sheet steel producers is ongoing and concern about new foreign players emerging to take US market share remains, especially when domestic producers are maintaining their CRC and coated sheet prices well above international levels.
However, the options to fill the Chinese void for these products, particularly into the Gulf and East Coast regions, remain relatively new and so far not exploited. Turkey and Vietnam have been the two players to increase their presence in the US market for the two products and there is some concern regarding elevated levels of material arriving later this year that could pressure the domestic market again. It remains unclear if the volume will be enough to really impact pricing by moving the supply needle back into the red.
Despite the recent price pressure in the US sheet market, one would be hard-pressed to find a domestic mill executive who would argue his company was better off a year ago. The supply side of the sheet market has been corrected, at least for now, but trade cases and mill closures are not a remedy for lackluster steel demand. If struggling steel-consuming sectors, particularly energy, heavy equipment and agriculture, can improve, the US market may be well down the road to a full recovery.