Fabricated structural steel market participants and analysts in the United States hold mixed views on a trade case filed this past week against imports of the product from Canada, Mexico and China.
The case, filed by the American Institute of Steel Construction (AISC) on Monday February 4, seeks countervailing and anti-dumping duties for a wide variety of fabricated carbon, alloy and stainless structural steel products primarily consumed in building and infrastructure construction markets.
If US producers duties against the targeted countries, "and assuming typical yield loss associated with fabrication operations, we believe this would translate into incremental steel consumption of 1-2 million tons collectively of beams, merchants, plate and sheet steel mill products. This of course assumes other countries do not work to fill this gap," Cowen analysts Matthew Barry and Tyler Kenyon said in a research note.
“I think in the intermediate term there’s a benefit to demand for upstream steel and for fabricated products, but I think over the longer term manufacturing cost competitiveness wins out,” Kenyon told Fastmarkets.
The US protectionist measures will ultimately encourage "domestic manufacturers to source more of a downstream component or product overseas or move their operations, to the extent that it’s feasible, outside the US to produce it more cost effectively,” he added.
The alleged anti-dumping duties are 31.46% for Canada, 41.39% for Mexico and 218.95% for China, with alleged subsidies for the three countries in excess of zero, the Cowen analysts said in the report.
The AISC estimated total domestic consumption of fabricated structural steel at 4.7 million tons, with 75% of consumption (3.4 million tons) serviced by domestic fabricators. The remaining 25% (1.3 million tons) are sourced from imports, Cowen said. The countries targeted in the petition accounted for an estimated 20% of overall consumption (950,000 tons) in 2017, or 75-80% of total imports.
Still, in the past five years offshore fabricated steel imports have more than doubled, far exceeding the growth of the US construction market, Jeff Sterner, president and chief operating officer of structural steel fabricator High Industries, said in testimony supporting the trade case.
US imports of fabricated structural sections surged from 2015-17 and remained elevated last year, the AISC said in its petition, pegging 2018 imports from the targeted countries at 1,038,424 short tons compared with 949,578 tons in 2017 and 783,641 tons in 2015.
AISC claimed in its petition that domestic fabricators can't compete with low-priced fabricated steel from other countries, citing the loss of one of the Hudson Yards projects in New York City to a subject fabricator.
Fastmarkets AMM’s latest monthly assessment of domestic W 8- x 8-inch steel beams put it at $41.75 per hundredweight ($835 per ton) on January 24, down by 4% from the more than six-year high of $43.50 per cwt reached in June 2018 but still up 16% from $36 per cwt on January 25, 2018.
Fastmarkets AMM's weekly assessment for cut-to-length plate was at $48 per cwt on February 1, down by 3% from a more than seven-year high of $49.50 per cwt in November but up by 23.1% from $39 per cwt on February 2, 2018.
Fastmarkets AMM assessed US domestic A500 hollow structural sections at $1,020-1,040 per ton ($51-52 per cwt) fob mill on February 7, down by 14.7% from a high of $1,190-1,225 per ton in August and up by 6.7% from $950-980 per ton one year ago.
“The domestic industry lost a project for 3.6 million square feet of commercial construction, which \would have supported 1.3 million man hours of production,” AISC said of the Hudson Yards project. "To put that in perspective, this single [Hudson Yards] project could have supported more than 600 American workers, full time for an entire year."
One buyer, whose company does fabrication jobs throughout the US Northeast, told Fastmarkets AMM that about 100,000 tons of material for the project came from Canada, Mexico and Italy, with a large amount of steel also claimed to have been purchased in China by the owner of the Hudson Yards project.
“It affected the domestic market by the fact that domestic fabricators had to go find work elsewhere instead of doing it there [in New York],” this buyer said. “We’re in favor of this [trade case] just from a level-playing field perspective, we just want fair competition and at this point we haven’t had that.”
The Canadian Institute of Steel Construction (CISC), which represents the interests of Canadian steel fabricators, criticized the AISC's trade case.
“AISC’s allegations that these products from Canada are unfairly traded and cause injury to US producers of fabricated steel products are baseless. The negative effects of the Section 232 steel tariffs are the more likely cause of injury for the US downstream steel sector, not Canada. Canada and the US have been in each other’s markets for generations,” CISC president and chief executive officer Ed Whalen said.
One domestic trader of beams agreed. “We [in the US] are building barriers for ourselves” by filing this trade case, this trader told Fastmarkets AMM.
The US-Mexico-Canada Agreement (USMCA) was hard enough to negotiate with Canada and Mexico to begin with, this trader added.
“The USMCA took much longer than people expected and it still has not been fully implemented, as far as I know, because the Section 232 tariffs have not been removed yet,” a removal that both Mexico and Canada expected, the trader said. This new trade case “just gives Mexico and Canada more ammunition to go against our government” in ongoing trade negotiations.
“I think our trade relations with these three countries are currently in flux,” Kenyon told Fastmarkets AMM. “We have the USMCA agreement, which is still pending - including a number of pieces and parts - where all sides still need to come to the table.”
Patrick Fitzgerald in New York and Nat Rudarakanchana in Chicago contributed to this report.