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US-Russia flat-roll deal to curb imports: market

Keywords: Tags  suspension agreement, Russia steel, Commerce Department, ITA, hot-rolled coil, plate, steel, Catherine Ngai


NEW YORK — The flow of Russian hot-rolled steel into the U.S. market will likely slow due to uncompetitive prices following last week’s revised U.S.-Russian suspension agreement, market sources told AMM.

Under the terms of the draft agreement, the minimum prices for Russian hot-rolled steel sold in the United States would be increased to "bring them into alignment with current U.S. prices."

Reference prices for the three months ending Dec. 3 will rise about 47 percent, with commercial- and structural-quality steel moving to $601.75 per tonne from $409.01 per tonne, high-strength low-alloy steel to $661.92 per tonne from $449.05 per tonne, and high-grade coil and sheet for pipe and casing to $770.24 per tonne from $522.10 per tonne.

"At the new prices, no one would be interested in paying for foreign product," one steel trader said, noting that Russian prices now effectively match domestic levels. "If the U.S. price weakens, even just a bit, it wouldn’t make any sense."

However, the domestic industry argues that the revised agreement creates a more level playing field.

"The old agreement’s reference prices were no longer preventing price undercutting in the way the formula was calculated. This new agreement establishes a new benchmark, which is more reflective of market conditions," Alan Price, partner at Wiley Rein LLP and counsel to Charlotte, N.C.-based Nucor Corp., told AMM.

"Under the existing statutes, a suspension agreement must prevent undercutting. The new price is much more likely to do so."

The U.S. Commerce Department and Russia reached the tentative agreement on hot-rolled steel imports Friday (amm.com, Nov. 16).

The suspension agreement allows Russia to ship steel to the United States as long as it remains below a certain annual volume threshold and above a certain quarterly pricing point. However, the Commerce Department’s International Trade Administration said earlier this year that the deal no longer prevented the undercutting of domestic prices, and as such was considering terminating the arrangement if no compromise could be reached (amm.com, May 29).

Meanwhile, others argue that with limited foreign mills offering hot-rolled steel at prices competitive enough for the U.S. market, the increased prices are bad for the spot market.

"It basically means Russia is out of the running," a second trader said. "Basically, this (draft) deal is more or less not even having a deal at all. There are lower numbers from Brazil and Turkey out there; it’ll be impossible to make Russia work."

Some 43,980 tonnes of Russian hot-rolled sheet and some 92,493 tonnes of Russian plate-in-coils hit U.S. shores in April, marking the highest figures in more than a year, according to Commerce Department data. Those tallies have since dropped off dramatically, however, with just 941.7 tonnes of sheet and no plate licensed to arrive at U.S. ports in October due to uncertainty over the agreement.

Moving forward, some say that selling Russian hot-rolled steel will be a matter of where domestic prices move.

"Right now, it’s a matter of differential between domestic and foreign prices. The domestic prices have been so volatile in the last three years; that’s what makes buying foreign steel risky," the first trader said. "The Russians haven’t been selling here (in the past few months), and maybe they don’t care so much anymore."

Public comments can be submitted to Commerce by Nov. 23, with final revisions to be signed by Nov. 30, according to the draft.


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