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Russian trade pact under fire, future uncertain

Keywords: Tags  steel, hot-rolled steel, steel sheet, Russia, Russian suspension agreement, Nucor, ArcelorMittal USA, imports Nat Commerce Department

NEW YORK — Domestic flat-rolled steelmakers are challenging a 15-year-old suspension agreement involving anti-dumping duties on hot-rolled flat steel products from Russia due to what the U.S. mills claim is "rampant underselling" by Russian producers.

The petition from six U.S. companies, which represent the bulk of domestic hot-rolled steel output, urges the Commerce Department to end an 1999 arrangement, which suspended its anti-dumping investigation into hot-rolled sheet, strip and plate-in-coil from Russia in return for restrictions on prices and export volumes.

"We are currently reviewing the request," a Commerce official told AMM.

Russian reference prices since the first quarter of 2004 have averaged nearly $256-per-tonne below U.S. market prices, according to the filing. That allows Russian producers to sell at volumes that injure U.S. steelmakers, an advantage evidenced in the surge of Russian imports in 2014 to more than 350,000 tonnes year to date, U.S. steelmakers said.

Russia’s export limit to the United States is 1,109,071 tonnes in 2014, with reference prices set quarterly, according to Commerce’s Enforcement and Compliance division. Prices for commercial- and structural-quality steel, for example, were set at $557.13 per tonne for July 1 to Sept. 30, 2014, up 1.4 percent from $549.20 a year earlier.

Data cited by petitioners show Russian imports lost some U.S. market share from 2011 to 2013, but prices from the Eastern European nation for such flat products undercut import prices offered by other countries.

Hot-rolled sheet, strip, and plate-in-coil produced in Russia made up 93.8 percent of U.S. imports for such products in 2011, but fell to an 81.6-percent share by 2013, according to government data compiled by the domestic petitioners.

But even as Russia lost market share it undersold other exporters by 18.4 percent in 2013, selling at prices almost one-fifth below the average of all foreign prices.

In 2013 and so far in 2014, Russia remained the cheapest foreign source of hot-rolled sheet, companies including Charlotte, N.C.-based Nucor Corp. and Chicago-based ArcelorMittal USA LLC said in their July 10 filing. Other petitioners include Pittsburgh-based U.S. Steel, Ghent, Ky.-based Gallatin Steel Co., Fort Wayne, Ind.-based Steel Dynamics Inc. and Lisle, Ill.-based SSAB N.A.D., Inc.

"The suspension agreement’s pricing mechanism has not worked in achieving its statutory purpose for at least a decade, demonstrating the necessity of terminating the agreement, rather than attempting to revise it again," petitioners said in the filing, which urges Commerce to impose anti-dumping duties on Russian imports of hot-rolled steel after terminating the agreement.

Market sources offered different views on the Russian suspension agreement and its possible demise.

Russian producers have not violated the terms of the suspension agreement, so the justification for scrapping the pact is unclear, one mill source said.

"(Russian mills) know where the line is that they can and can’t cross," the source said. "They’ve brought some (hot-rolled coil) in. And obviously done so at an increased volume compared to what they did in the past few years. But they’re not to the point where they feel that they would be penalized."

The push to terminate the suspension agreement may be little more than "scare tactics" aimed at taking advantage of current political tensions between the United States and Russia, but that does not mean they won’t be effective in chilling or scaring off some pruchases of Russian steel, one trader said.

"If the agreement could be terminated in 60 days, people won’t buy (Russian steel) until it’s settled one way or the other because they won’t want to be the importer of record," he said. "And it’s worse than a dumping case because you have less time."

Other countries transacting hot-rolled steel at prices close to Russia’s in 2014 year to date include Australia, Brazil and Turkey, which sold steel below $600 per tonne, according to Commerce data. AMM’s latest domestic price assessment for hot-rolled sheet stands at $33.50 per hundredweight ($670 per ton) f.o.b. Midwest mill.

Russian mills are watching developments surrounding the suspension agreement closely, the mill source told AMM.

Michael Cowden, Chicago, contributed to this story.

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