Steel Stocks Take Flight As U.S. Slaps Antidumping Duties

4 March 2016

Shares of major steel makers got a lift yesterday after the U.S. Department of Commerce ("DOC") levied preliminary anti-dumping duties on imports of cold-rolled steel from Brazil, China, India, Korea, Russia, Japan and the UK.

The commerce department, in its preliminary determinations, found that these countries are illegally dumping cold-rolled steel into the U.S. market and therefore, are subject to anti-dumping duties. The ruling marks yet another victory for crisis-hit U.S. steel companies in their ongoing battle against unfairly-traded, cheap imports that continue to flood the American market.

The DOC, on Tuesday, imposed a whopping duty rate of 265.79% on imports of cold-rolled steel from China. Chinese companies did not respond to the DOC's request for information and thus, got punished with big tariffs. This will badly hit Chinese exporters such as Angang Group Hong Kong Co., Ltd., Benxi Iron and Steel (Group) Special Steel Co., Ltd. and Qian'an Golden Point Trading Co., Ltd.  Brazil and Japan exporters received duties of 38.93% and 71.35%, respectively.

The DOC will now instruct U.S. Customs and Border Protection to start requiring cash deposits based on the duty rates for cold-rolled steel imports from these seven countries. In Dec 2015, the commerce department imposed countervailing duties on imports of cold-rolled steel from Brazil, China, India and Russia including a massive duty rate of 227.29% on China.

The biggest U.S. steel producers - U.S. Steel X , AK Steel AKS, Nucor NUE , Steel Dynamics STLD and ArcelorMittal USA, a part of ArcelorMittal MT - filed anti-dumping petitions in Jul 2015 with the U.S. International Trade Commission ("USITC") and the DOC against eight countries (Brazil, China, India, Japan, the Netherlands, Russia, South Korea and the UK) alleged for illegally dumping cold-rolled steel that is used to make automotive products and appliances, among others.

The petitions charge that an influx of subsidized imports of cold-rolled steel from these foreign producers is causing significant injury to the country's steel industry. These producers exported over $1.2 billion of cold-rolled steel to the U.S. market in 2014 including $514 million from China.

These imports have captured an increasing share of the U.S. market, thereby hurting production, shipments, selling prices and margins of U.S. steel makers.

The USITC terminated the investigation on imports from the Netherlands in Sep 2015 after concluding that the quantity of imports of cold-rolled steel from the country was negligible during the 12 months preceding the filing of the trade case and hence did not cause or threatened to cause injury to the U.S. industry.

The latest anti-dumping ruling provided a much-needed boost to the stocks of leading steel companies which have been hammered by a tide of cheap imports over the past few years, largely contributing to a slump in steel prices.

U.S. Steel racked up the biggest gain with its shares closing 23.5% higher yesterday.  AK Steel's shares shoot up 20.1% while Steel Dynamics gained 6.2%. Nucor notched up a 3.1% gain while ArcelorMittal's shares rallied roughly 15.5%.

American steel producers are struggling to cope with falling steel prices as a result of the combined impact of imports and overcapacity in the industry. Low costs of production have enabled foreign producers (especially China) to sell their products at cheaper rates, leading to an industry-wide price decline. Price declines are expected to continue if tariffs are not imposed on imports.

The United Steelworkers ("USW") union has lauded the DOC's new ruling stating that it is "welcome news" for steelworkers at U.S. steel mills and another key step in the ongoing fight to restore fair trade conditions for cold-rolled steel products made in America.

The commerce department will now verify the information submitted by the respondent foreign producers and issue verification reports to interested parties. This will be followed by an opportunity for parties to provide legal arguments on the preliminary decision and the verification reports to the DOC and to participate in a hearing.

The commerce department is expected to issue its final rulings on China and Japan investigations on May 17 followed by final determinations on other five investigations on July 13. The USITC is also expected to make its final injury ruling on China and Japan in June and on five other countries in August. No anti-dumping orders will be issued if the final determinations by these regulators are negative.   

The DOC, in Dec 2015, also slapped anti-dumping duties on imports of corrosion-resistant steel from China, India, Italy and South Korea including a staggering anti-dumping duty rate of 255.80% on imports of these products from China. Final ruling of the DOC on the corrosion-resistant steel case is expected in late May.

U.S. steel makers, in Aug 2015, also filled anti-dumping and countervailing duty petitions against seven countries accused for illegally dumping certain hot-rolled steel flat products into the American market. Preliminary determination by the DOC on this case is expected on Mar 14, 2016 with a final ruling in late May.

Favorable final determinations in these trade cases will ensure a fairer and more competitive market for American steel makers and workers.




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