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Traders stop offering Chinese steel

Keywords: Tags  stel, steel trade, China, trade cases, steel imports, oil country tubular goods, steel traders, Michael Cowden

CHICAGO — Some large trading houses have stopped accepting future orders for coated and cold-rolled steel from China due to fears of potentially imminent trade action.

The development comes as AMM’s price range for cold-rolled coil widened to $600 to $660 per ton ($30 to $33 per hundredweight), with some suppliers of Chinese product said to be suggesting that customers boost their next order because it could also be their last.

"Some trading companies are still offering Chinese futures. But we’ve stopped," one trader said, estimating that trade cases could come within 30 to 40 days after a decision on oil country tubular goods (OCTG) next week. That makes ordering Chinese steel today that might not arrive until November too risky, he said.

"We’re waiting for the fireworks," the trader said. "For material coming from offshore, with China you’re probably already in trouble. If you’ve got any on the books, I think the stuff may ultimately not show up."

Trade actions against coated product—galvalume and galvanized—are expected to follow on the heels of the OCTG decision, with a trade case petition on cold-rolled coming afterward, market sources said. The cases could come against Chinese producers as well as those in India, South Korea and Taiwan, they said.

Anti-dumping and countervailing duties are likely to hit Chinese material, with critical circumstances also expected to come into play, pushing the dates for duties forward, market sources said. "The question is how fast and how deep they’ll hit us," the trader said, echoing other sources.

Domestic mills feel trade petitions are necessary to recover demand in three big product lines: hot-rolled, coated and cold-rolled steel, market sources said. The OCTG decision should boost hot-rolled demand, but trade actions will likely be necessary to recover market share in coated and cold-rolled markets, they said.

"The Chinese will get hit with critical circumstances the moment these filings happen," one mill source said. "We have already seen Chinese mills offer the sales pitch that ‘This might be the last go-round, so you might want to double up.’"

A trade petition against China alone would be a game-changer because the low end of today’s market has been set by Chinese mills, market sources said. For example, the spread between Chinese and U.S. cold-rolled offerings has become too wide to be sustainable, they said.

AMM’s price for cold-rolled is $39.50 per cwt ($790 per ton), although some market sources have pegged domestic prices as low as $37.50 per cwt ($750 per ton). But in either case, the spread between import and domestic is still around $100 per ton or more, market sources said.

Trade petitions against China were almost a foregone conclusion, the mill source said, but he worried that other mills could push the trade-case envelope too far, potentially angering automotive customers if the scope is too broad. "Imports have a role to play. Their percent of apparent consumption may have gotten out of whack, but just because you’re on a winning streak doesn’t mean you should file against everyone in the phone book," he said.

While some trading houses were said to have stopped offering futures for Chinese materials, they were reportedly still taking orders for steel from India, South Korea and Taiwan. Domestic mills may target those countries—and potentially others—but any duty margins won’t likely be big enough to knock them out of the U.S. market, the source said.

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