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Commerce reviewing challenge to Russian agreement

Keywords: Tags  suspension agreement, Russia, trade petition, hot-rolled, cold-rolled, oil country tubular goods, OCTG

The Commerce Department said it is reviewing a petition from six U.S. steelmakers to terminate a longstanding suspension agreement with Russia on anti-dumping duties on hot-rolled flat steel products.

The petitioners--ArcelorMittal USA LLC, Chicago; Gallatin Steel Co., Ghent, Ky.; Nucor Corp., Charlotte, N.C.; SSAB Americas, Lisle, Ill.; Steel Dynamics Inc., Fort Wayne, Ind.; and U.S. Steel Corp., Pittsburgh--argue that the agreement hasn’t stopped Russian producers from undercutting prices or a 2014 surge in Russian shipments.

“The suspension agreement has not prevented the suppression or undercutting of prices for U.S. hot-rolled steel for years,” Alan Price, counsel for Nucor, said in a statement. He cited year-to-date Commerce data showing that Russian hot-rolled imports rose more than 1,400 percent through June compared with the first six months of 2013.

The six companies, which represent the bulk of domestic hot-rolled steel output, are challenging the 15-year-old suspension agreement due to what the U.S. mills claim is “rampant underselling” by Russian producers. They are urging Commerce to end the 1999 arrangement, which suspended an anti-dumping investigation into hot-rolled sheet, strip and plate-in-coil from Russia in return for restrictions on prices and export volumes.

To end the agreement, Commerce or Russia’s Ministry of Trade must give written notice and the termination would not take effect until 60 days later.

“We are currently reviewing the request,” a Commerce official told AMM, although early in July a Commerce official had said that “the department currently has no plans to further amend or revoke this remedy.”

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, the U.S. steelmakers said. Russia’s 2014 export limit to the United States is 1,109,071 tonnes, up 6 percent from 1,046,293 tonnes last year, with reference prices set quarterly, according to Commerce’s Enforcement and Compliance division. Under the terms of the agreement, Russian steel prices are poised to rise in the third quarter; the minimum for commercial- and structural-quality steel, for example, will be $557.13 per tonne from July 1 through Sept. 30, up 1.4 percent from $549.20 a year earlier.

Government data cited by the petitioners show that Russian shipments of hot-rolled sheet, strip and plate-in-coil lost some U.S. market share from 2011 to 2013--accounting for 81.6 percent of U.S. imports last year vs. a 93.8-percent share in 2011--but prices undercut the average price of imports offered by other countries by 18.4 percent. In 2013 and so far in 2014, Russia remained the cheapest foreign source of hot-rolled sheet, the U.S. companies said in their petition.

“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,” the 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. They’ve brought some (hot-rolled coil) in, and obviously done so at an increased volume compared with 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 purchases of Russian steel, a 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. And it’s worse than a dumping case because you have less time.”

Changes to the suspension agreement with Russia are unlikely, some sources familiar with the matter said. Others said that any such move might not be received well, given what they said is an unreliable domestic supply chain riddled with lingering winter-related production issues and mill outages. But some said the issue should be taken seriously, noting fierce competition between Russian and domestic material in the Southeast.

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