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Divergent Stainless Steel Price Trends Derive From Section 232

Stainless steel markets throughout the world have responded differently to the United States’ announcement, at the beginning of March 2018, of 25 percent tariffs on steel imports and 10 percent tariffs on aluminium.

Uncertainty persisted as temporary exemptions were granted to supplies from selected countries, until the end of May. A quota arrangement was agreed with South Korea. On May 31, the United States confirmed that tariffs will be imposed on imports from its NAFTA associates, Canada and Mexico, as well as the European Union effective from June 1.

In response, the European Commission has launched a safeguard investigation, in an effort to thwart the redirection of steel supplies, previously destined for the US market, into the European Union. This, like the US Section 232 action, is likely to lead to the imposition of import quotas or tariffs.

While some suppliers in Europe and Asia attempted to maximise shipments to the US, in advance of the application of trade measures, the attitude of most buyers and sellers has been cautious. Exports to the United States have declined. Meanwhile, we have many reports of producers elsewhere making competitive price offers in markets that they have not previously explored.

This has resulted in divergent price trends in the different regions. In the light of reduced import tonnages and the impending introduction of tariffs on future shipments, US domestic suppliers have met little resistance to substantial price hikes, in their home market.

Producers in Europe and Asia, conversely, have struggled, in recent months, to raise selling values, by even enough to cover the rising cost of raw materials.

Between February and May, MEPS’ North American average price, for grade 304 cold rolled coil, increased by 15.5 percent. During the same period, the corresponding Asian average rose by just 1.6 percent, in US dollar equivalent terms, while the EU figure dropped by 2.4 percent.

Source: MEPS – Stainless Steel Review


Section 232 Continues to Cast a Shadow Over Emerging Steel Markets

Brazil

Brazilian steelmakers are optimistic about the strength of domestic consumption in 2018, highlighting improving market fundamentals in both the local and global steel markets. Additionally, Brazilian exports to the United States are temporarily exempt from measures related to the Section 232 investigation.

Russia

Negotiations in the Russian Federation remain arduous. Trading houses continue to be frustrated with the pricing positions adopted by their domestic suppliers. The latest initiative is viewed as unwarranted and not supported by underlying demand.

India

The Indian steel industry is forecasting that underlying demand will remain strong until mid-June, supported by government infrastructure spending and strengthening consumer demand. Nonetheless, MEPS notes growing resistance from end-users to the recent price increases. Moreover, the Modi government signalled it planned to formally lodge a trade dispute against the United States, at the World Trade Organisation (WTO), if the Trump administration does not exempt Indian steel goods from rising tariffs.

Ukraine

Supply chain participants report no changes to business activity, in the Ukrainian steel market. Stockists are concerned about carrying too much inventory over the next two months, fearing a downward price correction. Export activity is stable, with prices under renewed negative pressure following developments in the Chinese market.

Turkey

End-user demand in Turkey is tepid, disrupted by Mustafa Kemal Atatürk (National Sovereignty and Children’s Day), and renewed political uncertainty. Presidential and parliamentary elections are scheduled for June. The depreciation of the Turkish lira against the US dollar further exacerbated the situation. Scrap brokers predict that the domestic mills will try to push scrap prices down again in the near future, as both export and local demand remains slow.

UAE

Challenging business conditions persist, in the United Arab Emirates. Distributors are adopting a “wait-and-see” attitude, expecting purchasing activity to slow down ahead of the festive month of Ramadan. However, the outlook for the remainder of 2018 is positive, after the announcement of new commercial, residential and infrastructure projects, in Dubai and Abu Dhabi. Outside the GCC region, export opportunities are limited.

South Africa

South Africa’s Department of Trade and Industry (DTI) failed to persuade the US government to exempt the country’s steel and aluminium exports, from the tariffs, stipulated in the Section 232 proclamation. In further submissions, the ministry proposed a settlement based on 70 percent of the 2017 exports as a quota to the US. South Korea negotiated a similar quota arrangement with provisions, in late March.

Mexico

Mexican steel traders retain a cautious outlook for the second quarter. Downstream buying activity is unsettled by the aggressive pricing strategies adopted by domestic suppliers. Moreover, developments across the border in the United States continue to be watched carefully. Meanwhile, the National Chamber of Iron and Steel Industry (CANACERO) pressed the government for additional measures to protect the domestic manufacturing and steel industries from foreign competition.


Section 232 Probe Creates Chaos In Global Steel Industry

The consensus view from MEPS research, is that a large degree of uncertainty persists in the global steel market. It is becoming increasingly evident that North American and European steel buyers are hesitant about making purchasing decisions.

Section 232

US authorities introduced a 25 percent tariff on steel imports last month. Concerns regarding the final outcome of the Section 232 probe have developed around the world. These, particularly, relate to the potential for the diversion of trade into the EU. As a result, the European Commission is investigating the possibility of introducing further trade legislation. The likelihood is that existing and additional trade protection measures would lead to a decrease in imports and, potentially, cause supply shortages, in the US and EU.

It is widely perceived that protectionism restricts the choices for the customer. These measures are designed to safeguard the strategic interests of a steel-producing nation. Customers would, arguably, be denied the opportunity to procure material at competitive prices.

North America

In North America, regional mills have been given relatively free rein to escalate flat products’ selling values, in recent months – with minimal resistance from buyers. Amid a healthy trading environment, many US stockists remark that availability of material has tightened. At the end of this month’s research period, it was increasingly apparent that the positive pricing momentum, within the region, is stalling. MEPS believes that US flat product transaction values are nearing the peak of the current cycle. It is likely that US prices have now increased to levels at which imports are competitive, once again. Furthermore, local steelmakers intend to raise production. This should prevent shortages from developing.

Despite existing and potential new trade measures, MEPS predicts that global steel prices will come under negative pressure, in the second half of 2018.

Source:  Keynote from MEPS International Steel Review 


Section 232 Action Creates Ripples Throughout Stainless Steel Markets

Divergent trends have emerged, in worldwide stainless steel markets, in the wake of the United States government’s Section 232 deliberations. Acting on the recommendations of the report arising from the investigation into the effect of foreign-produced steel on US national security, President Donald J. Trump announced a tariff of 25 percent, to be applied to all steel imports into the United States, effective from March 23.

American stainless steel producers and distributors alike acted swiftly, applying increases to their selling prices. While this can be seen as taking advantage of the rising cost of material from overseas competitors and a predicted tightness in the supply of stainless steel, it was hoped that this move would discourage panic buying and, to some extent, avert that shortage.

Agreements were soon made with many of the United States’ leading trade partners, granting them exemption from the immediate imposition of the Section 232 tariffs. However, in a number of instances, the action is merely delayed, pending further negotiations. Consequently, US customers and traders remain reluctant to place orders with suppliers from certain countries, for fear that tariffs could be re-imposed by the time material is delivered. In this environment, it should be possible for local sellers to maintain their elevated prices, in the near term.

In other regions, this development has raised the spectre of a glut of stainless steel, as some producers lose their current outlets in the United States. Market prices have weakened, accordingly.

In Europe, despite encouraging domestic sales volumes, in the early part of this year, and a perception of strong underlying demand, stainless steel flat product basis values slipped, in March. They could decline further, in April.

Producers in South Korea were unable to secure, in March, the increases that they thought were justified by earlier rises in raw material costs. LME nickel values are believed to have passed their peak, for the current cycle. Chinese stainless steel coil market prices have been sliding, in recent weeks.

Source: MEPS – Stainless Steel Review – March 2018 Issue

People also read: Further Uncertainty Created by Section 232 Exemptions


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Further Uncertainty Created by Section 232 Exemptions

US steel mills lifted selling figures rapidly, in recent months, due to the expectation of rising import prices and supply shortages, following the Section 232 investigation. After the announcement of a blanket 25 percent tariff, it was specified that NAFTA partners, Canada and Mexico, would be excluded from the measures. Subsequently, a number of countries sent delegations to the US to discuss the possibility of exemptions.

On March 22, the day before the tariffs went into effect, Trade Representative Robert Lighthizer stated that the imposition of duties would be “paused” for material sourced from the European Union, Argentina, Australia, Brazil and South Korea, while further discussions take place. It is expected that other nations, such as Japan, may attempt to petition the US authorities for a temporary reprieve. Despite the exclusions, US steelmakers are expected to continue to attempt to lift selling prices, in the coming months, as delivery lead times extend.

The manner by which the policy has been implemented has caused a great deal of uncertainty for supply chain participants, both in the US and globally. Domestic end-users voiced their concerns that elevated steel prices would result in a loss of competitiveness. Steel mills worldwide feared that imports would be redirected into their local market. Furthermore, the blunt nature of the proposed 25 percent tariff did not take into account the complexities of the steel sector. A number of finished steel products are not produced in sufficient quantity, in the US, to meet local market requirements. Furthermore, steel slabs imported by re-rollers, predominantly those located on the West Coast, are a fundamental part of the supply chain.

The appeals process for exclusions was formalised just days before the tariffs came into effect. The market is now likely to endure further uncertainty, in the coming months, as the full extent of the measures are revealed.

Source: MEPS – International Steel Review – March 2018 Edition 

People also read: EU Steel Prices Rise Despite New US Import Tariff Announcement


Section 232 Reservations Unsettle the Emerging Steel Markets

The trading climate in the Brazilian steel market is unchanged since our February report. Risk-averse traders plan to retain minimum inventory in the interim, highlighting that the recent upward trend in local mill transaction values is unsustainable.

The business environment is challenging, in the Russia. Distributors conveyed frustration with the price increases proposed by their domestic suppliers. The latest initiative is viewed as unjustified and is not supported by underlying demand. We note a reluctance on the part of end-users to commit to forward orders.

Challenging trading conditions persist, in India. Bearish stockists are reluctant to sign contracts with the mills at the moment. Uncertainties persist regarding the sustainability of the latest price increases. Correspondingly, end-users are adopting a wait-and-see approach.

The trading atmosphere is unchanged, in Ukraine. Stockists plan to postpone purchases until the pricing scenario is more transparent. We note little appetite for purchasing at present amongst construction firms.

In Turkey, buyers are reluctant to purchase as they would like to get a clearer picture of the market. Speculation is rife that local steelmakers will persevere with aggressive pricing positions, in April. Meanwhile, Turkish exporters conveyed disappointment after the US Department of Commerce released its wire rod investigation findings. Wire rod products from Turkey were found to have received countervailing subsidies from the government.

Business sentiment is unchanged, in the United Arab Emirates. Distributors are holding off purchasing to see how demand develops. Moreover, Emirati rolling mills kept selling figures unchanged for April’s production programme. Export opportunities remain limited outside the GCC region.

South Africa’s Department of Trade and Industry (DTI) has stressed that the country’s steel and aluminium exports do not represent a threat to either US industry or jobs. As a result, the DTI made a formal submission for exemption status, in accordance with the Section 232 proclamation. Meanwhile, the South African Iron and Steel Institute (SAISI) and the Steel and Engineering Federation of Southern Africa (SEIFSA) highlighted that the exclusion from the US market put an estimated 310,000, steel related, jobs at risk.

In Mexico, distributors and service centres struggle to adapt to the unpredictable business environment. The majority are booking for immediate requirements only, due to continuing price fluctuations. The National Chamber of Iron and Steel Industry (CANACERO) welcomed the US government’s decision to temporarily exempt Mexican steelmakers from the Section 232 import tariff. However, the association expressed concern that the exemption is not permanent, and is being used as part of the re-negotiation of the North American Free Trade Agreement (NAFTA).

Source: MEPS – Developing Markets Steel Review – March 2018 Edition