Steelmakers Ask U.S. to Impose Tariffs on China, Others
29 July 2015
A group of steelmakers in the U.S. on Tuesday asked the federal government to impose tariffs on steel shipments from eight countries, the latest salvo in the industry’s battle to cope with record imports.
The petition claims that steelmakers in Brazil, China, India, Japan, South Korea, Netherlands, Russia and the U.K. dumped—or sold at unfair prices—cold-rolled steel, which is used in construction and to make appliances, automotive products and containers. It also claims that Brazil, China, India, South Korea and Russia have illegally subsidized their steelmakers.
The companies that filed the request— AK Steel Holdings Corp. , the U.S. unit of ArcelorMittal ; Nucor Corp. ; Steel Dynamics Inc. ; and U.S. Steel Corp. —say their business has been hurt by the imports. News of the petition helped boost the stock market value of all five companies Tuesday.
The American steel industry is reeling. The U.S. benchmark hot-rolled coil index has fallen 22% to $467 a ton this year.
U.S. Steel, after market close Tuesday, reported a loss of $261 million in the second quarter, its eighth loss in the past 10 quarters. Chief Executive Mario Longhi said the firm had “taken aggressive and decisive actions to address the extremely challenging conditions we continue to face in North America.” U.S. Steel has idled at least six plants, and laid off, or issued layoff warnings to, over 9,000 workers in the past 18 months.
In its outlook, the Pittsburgh-based steelmaker said it expects the market “to improve in the second half of 2015 from the conditions we experienced in the first half, as supply chain inventories continue to rebalance, primarily in our flat-rolled markets.” However, it added that “if the current pace of commercial improvement in our markets does not increase, we would expect to be near the low end” of its forecasts of between $115 million and $315 million in earnings before interest and taxes.
At the root of the problem are record exports from China as that economy cools. China buys roughly half the world’s steel, so any hiccup there matters.
Not all the imports into the U.S. come from China, but many are displaced from countries where China has grabbed market share. American steelmakers are frustrated because their domestic market is relatively solid, with the exception of demand from energy producers, which have suffered from the oil price swoon.
Imports of cold-rolled steel from the eight countries cited Tuesday more than doubled between 2012 and 2014, from 798,000 tons to 1.75 million. In 2014, these countries exported more than $1.2 billion of cold-rolled steel to the U.S.
“AK Steel and the domestic industry have been facing a surge of what we believe are unfairly dumped and subsidized imports of cold-rolled steel coming into this country,” said James L. Wainscott, the company’s chairman and chief executive. AK Steel said cold-rolled steel comprised about 20% of its shipments in 2014.
On Tuesday, AK Steel reported a second-quarter loss of $64 million, or 36 cents a share. Even with Tuesday’s stock-price gains, the company has lost over 65% of its market value in the past year.
Nucor reported a 15% drop in second-quarter profit last week.
The tariffs might not be a solution to the steel industry’s woes. “The tariffs will help prices in the short term but eventually buyers will find other sources of supply,” says Charles Bradford of Bradford Research Inc.
It is the second big trade action the steel industry has taken this year. In June, six U.S. steelmakers filed a petition against five countries, including China, seeking to protect their market for a common kind of coated steel used in the automobile and construction industries.
The U.S. Commerce Department will rule before the end of the year whether to impose import duties on coated steel. Congress recently passed legislation making it easier for industrial companies to obtain tariffs on imports.