U.S. Raises Import Duties on Chinese Steel
The story of steel is in many ways the story of the People’s Republic of China. When the Communist Party seized control of the mainland in 1949, they singled out steel as a strategic sector for heavy investment, hoping to follow the Soviet example of industrializing within a single generation. China is the world’s largest manufacturer of steel, producing 50 percent of global output. But as China’s growth slows, the excess steel that Chinese industry doesn’t need is washing up overseas.
China’s low-cost metal producers have been widely cited as the main culprit for a glut in global steel production that has pushed down prices. Moreover, China’s move to devaluate its currency has triggered accelerated steel exports from the country amid waning demand at home. A cheaper yuan has made Chinese exports less expensive in overseas markets.
Chinese steel production decreased 2 percent to 803.8 million metric tons in 2015. China’s steel export volume jumped 20% to 112.4 million tons in 2015, topping 100 million tons for the first time, according to trade statistics announced by China’s General Administration of Customs. The figures mean China’s export volume last year exceeded the total output of crude steel by Japan, the world’s second-largest producer. Chinese steel exports rose 21 percent year-on-year in 2015, reaching 14 percent of the country’s total steel production.
Weakening domestic demand amid a cooling economy is forcing China to step up steel exports to attractive overseas markets with the U.S. and European Union being prime target markets. Low costs of production in China have enabled the local producers to sell their products at cheaper rates to these markets. In the U.S., the world’s second-biggest steel consumer, U.S. steel producers such as U.S. Steel Corp. and Nucor Corp. have recently filed trade cases against imports of coated steel products from China.
U.S. Steel (NYSE:X), one of the biggest steel producers in the United States, idled its operations in Granite City, Illinois, in December, costing 2,000 jobs. In late January, U.S. Steel notified the State of Texas that it may lay off up to 700 workers temporarily at its Morris County, Texas, tublar plant. “If we can’t be competitive in such a difficult environment and also deal with unfair foreign competition, for whatever reasons, additional plant closures may be necessary,” U.S. Steel CEO Mario Longhi said.
AK Steel, another major U.S. producer, reported a net loss of $510.7 million for 2015, citing an 11 percent decline in average steel selling prices versus 2014. AK Steel recently closed its Ashland, Kentucky, plant, laying off between 600 and 700 workers. U.S. Steel posted a net loss of $340 million in the first quarter of 2016. U.S. Steel, for example, laid off 1,300 workers in January 2016.
Based on preliminary Census Bureau data, the American Iron and Steel Institute (AISI) reported that, in 2015, total and finished U.S. steel imports were 38,718,000 and 31,425,000 net tons (NT), respectively, down 13% and 7% respectively, vs. 2014. Finished steel import market share is estimated at 29% for the 2015. For full year 2015, the largest offshore suppliers were South Korea (4,854,000 NT, down 11%), Turkey (2,808,000 NT, up 28%), China (2,374,000 NT, down 25%), Japan (2,259,000 NT, up 7%) and Germany (1,515,000 NT, up 19%).
At the same time, U.S. steel production has continued to decline. Domestic shipments for 2015 stood at nearly 87 million tons, a nearly 12% decrease over what American steel mills shipped in 2014. According to the data from Steel Industry Executive Summary, in year-to-date 2016, U.S. imports of steel mill products have amounted to 6.8 million metric tons, a 35.8% decrease from 10.6 million metric tons in YTD 2015. Canada accounted for the largest share of U.S. imports by partner country thus far in 2016 at 19%, followed by Korea (12%) and Brazil (12%). In March 2016, steel mill imports from China decreased 13.8% to 63.5 thousand metric tons from 73.7 thousand metric tons in February. March 2016 imports from China represented 2.7% of all U.S. steel mill imports, down from 3.6% in February.
The U.S. steel producers are still struggling to cope with falling steel prices as a result of the combined impact of imports and overcapacity in the industry. Beijing has been repeatedly criticized by the U.S. and the European Union for dumping its excess steel capacity in the overseas markets at unfairly low prices. China’s steel exports jumped 7.6% year over year in the first four months of 2016.
The Department’s International Trade Commission carried out an investigation and concluded that China—in addition to India, Italy, Korea, and Taiwan are selling steel products in the U.S. market below their fair values and therefore, are subject to anti-dumping duties.
The biggest U.S. steel producers, in Jun 2015, filed anti-dumping and countervailing duty petitions with the U.S. International Trade Commission (USITC) and the DOC against five countries accused for illegally dumping cheap corrosion-resistant steel. The petitions, which were filed by six major U.S. steelmakers including Nucor, U.S. Steel, AK Steel, Steel Dynamics and ArcelorMittal USA charge that a deluge of significantly subsidized imports of corrosion-resistant steel from China, India, Italy, South Korea and Taiwan are causing material injury to the U.S. steel industry.
In 2015, U.S. imports of CORE from China, India, Italy, Korea, and Taiwan were valued at an estimated $500.3 million, $219.6 million, $110 million, $509.1 million, and $534.4 million, respectively. These products are being illegally dumped by foreign steel producers in the American market at unfairly low prices that significantly undercut the prices of U.S. steel makers. As a result, the department said that Chinese corrosion-resistant steel would be subject to a final anti-dumping duty of 210 percent and anti-subsidy duty of between 39 percent and up to 241 percent. Anti-dumping and anti-subsidy tariffs of between 1 and 92 percent will apply to imports from various producers in South Korea, Italy, India and Taiwan.
The duties are supposed to offset unfair advantages Chinese steelmakers gained through government subsidies and by selling their steel in America for less than they could in China. The U.S. Department of Commerce has imposed more duties on corrosion-resistant steel imports from China and elsewhere in an effort to protect its industry from a glut of steel imports from around the world.
The other countries faced duties ranging from over 3 percent to 92 percent. The Department of Commerce says that the duties are an internationally accepted mechanism to seek relief from “injurious dumping and unfair subsidization of imports into the United States.”