Canadian service centers are beginning to react to the Section 232 tariffs implemented by President Donald Trump's administration against steel imports from the country by halting shipments to customers in the United States.
“In the current circumstances, it is prudent to temporarily suspend shipments to the US until such time as there is some clarity on the duration of the tariffs,” Farjess Inc president and chief executive officer Feroz Jessani wrote in a letter to customers dated Thursday May 31.
Another Canadian service center source, who declined to be identified, told American Metal Market on June 4 that his company had also notified its US customers that it would temporarily stop shipping to them. “Our margins aren’t enough to absorb 25%” Section 232 tariffs, he said.
The US ended Section 232 exemptions for Canada, the European Union and Mexico and imposed 25% tariffs on imports of their steel products effective June 1. Canada has threatened to impose retaliatory tariffs on US steel products and on a broad array of US agricultural and manufactured goods beginning July 1 if the Trump administration's tariffs remain in place.
Canada ships more steel to the US than any other country, supplying 16.5% (nearly 5.68 million tonnes) of the 34.47 million tonnes that landed on domestic shores in 2017, according to data from the US Commerce Department's Enforcement and Compliance division.
Canada is also the biggest destination for US steel exports, taking in nearly 4.68 million tonnes (49%) of the total 9.55 million tonnes of product shipped abroad by domestic mills during the period, the latest Commerce data show.
American Metal Market’s hot-rolled coil index was at $44.03 per hundredweight ($880.60 per ton) on May 31, roughly flat compared with $44.05 per cwt a week earlier, with market participants attempting to figure out whether Section 232 tariffs against Canada, Mexico and the EU would prove short-lived or have a lasting impact on the market.
“There is considerable uncertainty at the present time on the impact of these tariffs on the North American steel industry,” Jessani wrote, adding that he hopes the US and Canadian governments can resolve their differences in a “timely manner” to avoid harming the North American steel industry.
Brampton, Ontario-based Farjess Steel supplies hot-rolled coil, hot-rolled pickled and oiled, cold-rolled, galvanized, galvannealed, Galvalume and pre-painted steel to manufacturers and distributors, according to its website.
The Canadian service center source added that he hoped the trade spat between the US and Canada – the largest trading partner for most domestic states – would not last long, predicting that the two countries would resolve their differences within a month. But if they don't, the damage to the trade relationship could prove long lasting, he added.
As a result, this Canadian service center source said his company was evaluating its options should Canada retaliate against the US companies from which it sources steel.
“This is going to hurt Canada. But it’s going to hurt the States too. Maybe Hawaii is not one of them but Ohio, Pennsylvania and Wisconsin – this is going to hurt.”
The US could help smooth tensions by not insisting that Canada – whose troops serve alongside US forces and with whom the US has the longest unsecured border in the world – is a threat to national security. “That’s a joke. Let’s say what this is – punishment for not getting a deal on Nafta,” this source added.
Editor's note: This story was updated on June 5, 2018, to correct the US steel export figures for 2017. The original figures included in the story were for the first quarter of this year.