The imposition of tariffs on steel imports into the USA is not all bad news for stainless steel producers, according to a recent report by Markus A. Moll of Stainless & Metals Market Research, to be published in the April issue of Stainless Steel World magazine. Most high-volume stainless steel products have been excluded, stainless being only a secondary target.
The following tariffs have been declared on stainless steel products: bar (including rebar): 15% first year, 12% second year, 9% third year; wire rod: 15% first year, 12% second year, 9% third year; welded tube 15% first year, 12% second year, 9% third year; wire: 8% first year, 7% second year, 6% third year. Stainless steel slabs, ingots, billets, quarto plate, decoiled sheet, rope and cloth are exempt from the tariffs, as are stainless fittings and flanges and tool steel products. The duties come into effect on 20 March.
The tariffs were announced on 5 March in response to pressure from steel mills and the United Steelworkers of America (USWA). The measures, which will last for three years, are designed to act as a breathing space to allow the US steel industry to recover from its present woes. Advocates of the tariffs have complained about over-protected European markets, while critics claim the measures will hit US steel-consuming industries.
The decision has led to protests from steel industrial bodies in Europe and the Far East. In particular, Eurofer intends to challenge the decision as breaking WTO rules. However, the report finds, the US industry does not only have outdated and unproductive production facilities, particularly in stainless steels, while Europeans and Asians are not generally dumping their products in the US market. But the tariffs fail to address the issue of under-funded pension funds and excessive legacy costs. In the US system, unlike in Europe and Asian countries, pension fund administration and guarantees lie in the hands of the steel industry rather than the government. This places a heavy financial burden on the US steel industry.
The tariffs will certainly cause price rises, according to the report, though not to the full extend of the import tariff. There will be an import reduction in some products, where the US market becomes unattractive for European and Asian suppliers. In total there are about USD 450 million of stainless steel imports at stake, the most affected countries being in Europe and the Far East.
According to the report, it is unlikely stainless imports will flood into Europe after being denied entry into the USA. A far greater danger, the report finds, is the risk that other governments might follow the US route and block off their steel markets. Mexico has already announced 35% import tariffs, while Canada and Europe are mulling similar steps.
According to the report, there is little the risk that the USA will lose more stainless steel industry segments than it has already lost in the past. Some companies will react by shifting their stainless steel procurement outside the USA or by outsourcing manufacture of goods such as pumps and valves. There is significant risk that some heavy-volume bar and wire rod users will transfer out of the USA. On the other hand, the risk for welded tube is virtually non-existent.
Some US stainless steel manufacturers will gain greater market share in the next three years, but the overall market will not grow and could even shrink. This will result in faster growth in other countries, which will receive additional outsourced demand from US end-users.
It is up to the US steel industry to use the relief period to improve its competitiveness, the report concludes. A stronger US stainless steel industry can only benefit the entire world.