Trade has been an important topic for the U.S. steel industry over the past year, particularly after mills filed several high-profile suits against imports of reinforcing bar and oil country tubular goods (OCTG).
As 2013 wound down and 2014 began, a number of cases had either been resolved or were close to completion after governmental agencies listened to complaints from the steel sector, especially on competitive issues surrounding tube and pipe, and the OCTG sector in particular.
The reason you saw trade cases (in 2013) was because of the surge of imports (that) occurred 18 months ago. Thats the nature of a trade caseyou have to build a case and its based on data thats always going to lag, former American Iron and Steel Institute president and chief executive officer Thomas J. Gibson told AMM. Since 2010, weve seen a real spike in imports, and theyve remained at elevated levels through 2012-13, including products like corrosion-resistant rebar, line pipe and hot-rolled bar.
Gibson said that trade laws are not meant to cut out countries from the United States; the goal is to ensure that international trade rules are followed. This is the most open market in the world and we couldnt close it even if we wanted to.
The trade cases came at a time when imports and international overcapacity threatened to derail what otherwise has been something close to a golden age for many OCTG manufacturers.
In terms of actual steel demand, oil country tubular goods were one of the few steel-related products to show resiliency during the economic downturn, Lynn M. Lupori, managing consultant at Pittsburgh-based Hatch Management Consulting, said. While other energy-related steel goodsrig platforms, line pipe, etc.have benefited from these developments, OCTG is leading the charge in investment.
To try to keep it that way, several OCTG manufacturers and distributors asked the federal government for some relief from imported steel products.
The Commerce Departments International Trade Administration (ITA) is scheduled to give its preliminary ruling in a trade complaint against OCTG producers from nine countries on Feb. 13. A decision had been expected Dec. 9, but the Commerce Department cited the government shutdown as well as the complexity of the case in delaying the ruling.
Votes by the U.S. International Trade Commission were set for mid-April on the original timeline, but market sources are expecting delays due to the number of countries charged. One of the petitioners, Pittsburgh-based U.S. Steel Corp., for example, said in July that it expected the final decision in the case to take more than a year.
The flow of South Korean OCTG to the U.S. market remains high despite the ongoing trade case against the country, surprising market participants. They dont seem to be too frightened by this suit, one trader said.
U.S. imports of the product were expected to slow ahead of preliminary rulings from the ITA, but the delay in a decision might have emboldened Korean shippers, sources said.
OCTG shipments from Korea were pegged at 118,849 tonnes in October, according to Commerce license data, up 18.4 percent from the final import tally of the previous month, and up 32.5 percent from the same period in 2012.
Some sources said the high imports also might be a sign that Korean mills are confident they will be assessed low margins in the case, while others claim that the lack of an alternative market is compelling the inflow.
As a result of the influx and comparatively static demand, yards at import hub Houston are said to be filling up with pipe.
Theres no dramatic changes (in demand) one way or the other. Theres still a high level of competition in the market and I dont see that changing for a while, one southern distributor said.
Beyond Korea, the ITA named Turkish OCTG producer Yücel Boru Ithalat-Ihracat ve Pazarlama AS a mandatory respondent in the anti-dumping case against the country. Chesterfield, Mo.-based petitioner Maverick Tube Corp. had asked Commerce to select another respondent as the departments previous two choicesBorusan Istikbal Ticaret TAS and Borusan Mannesmann Boru Sanayi ve Ticaret ASare affiliated. In light of this affiliation, the department should treat the two respondents as a single entity, attorneys from Washington law firm Wiley Rein LLP wrote in a filing on behalf of Maverick Tube. They also argued that Borusan Istikbal should not be a mandatory respondent because it is a trading entity, not an OCTG producer.
Prices for imported J55 casing firmed at around $900 per ton in October from $880 previously as mills that were still shipping material sought higher prices due to the trade case, trader and distributor sources had said.
Imported line pipe prices, on the other hand, continued to soften, with imported X42 falling to $800 per ton in October from $820 previously as mills from countries affected by the case were more aggressive in offering the product, which was not under scrutiny. Sources said a line pipe trade case is likely if the OCTG case is successful.
If U.S. OCTG producers do prevail in the anti-dumping case, pricing in the OCTG market should improve, according to U.S. Steels top executive. I think ... an affirmative decision should result in import prices reflecting more of a regular market condition vs. prices distorted by unfair trade practices, president and chief executive officer Mario Longhi said during the companys third-quarter earnings conference call.
But the steelmaker does not see enough evidence to invoke critical circumstances in the case. We have not seen anybody cross the line that would prompt us to go toward the critical circumstances argument, said Dan Lesnak, U.S. Steel investor relations manager. Nobodys turned that way on us. Korean imports picked up a little bit ... but nothing that would jump out as someone really trying to beat the process.
The import share was around 47 percent for OCTG and 49 percent for line pipe during the third quarter, according to a company presentation, compared with 47 percent and 55 percent, respectively, during the second quarter. Total apparent demand for OCTG rose 5 percent to 1.77 million tons in the same comparison, with domestic shipments rising 3 percent and imports, led by Korea, climbing 7 percent, the company said, while line pipe project awards slowed considerably and demand for structural tubing remained steady.
Market sources expressed surprise at the high level of Korean shipments still coming to the United States even after the filing of the trade case in early July.
Distributor selling prices for OCTG dipped in October as market sentiment turned negative, according to the latest data from Tulsa, Okla.-based Pipe Logix LLC. The diffusion index of market sentiment dropped from 55 in September to 39 in October, a contracting market. Lower order volumes and higher inventories, coupled with lower price expectations, more than offset an expected decline in import volumes, Pipe Logix manager Kurt Minnich said.
OCTG products averaged $1,667 per short ton in October, down 0.4 percent from $1,673 in September. Seamless product averaged $1,801 per ton, down 0.8 percent from $1,815, while electric-resistance welded product inched up 0.1 percent to an average of $1,533 per ton from $1,532. The dips came after OCTG prices made their biggest gains of the year in September.
OCTG supply was 644,000 tons in August due to a surge of imports that was 100,000 tons over the trailing average, Minnich said, adding that supply was expected to return to more average levels in the remainder of the year.