Any weakening in the enforcement of the Section 232 tariffs on steel imports could lead to lower prices for steel commodities with seriously adverse effects on American producers, witnesses testified at a hearing of the Congressional Steel Caucus on Thursday March 5.
This is a particularly vulnerable time for the US steel industry, according to John Brett, president and chief executive officer of ArcelorMittal USA.
Weak US domestic demand for hot-rolled coil has sent prices lower than they were before the tariffs were imposed, making it more important that enforcement of the tariffs remain strong and consistent, Brett told the Congressional panel.
Fastmarkets’ daily steel hot-rolled coil index, fob mill US
was calculated at $30.33 per hundredweight ($606.60 per short ton) on March 5.
The index averaged $30.03 per cwt for the full year 2019, down by 27.4% from an average $41.37 per cwt in 2018 and off slightly from an average of $31 per cwt in 2017 - the year before 232 tariffs were imposed.
“The Section 232 is serving a vital need and must be kept strong,” Richard Fruehauf, senior vice president of strategic planning and chief strategy and development officer for U.S. Steel, said in his testimony. “A sudden weakening or dramatic change to the policy could result in a tidal wave of foreign steel swiftly undermining domestic production and jobs,” he added.
“Steel inventories held by Chinese traders are at their highest levels since May 2006,” Conway warned. Given those inventories and more than 400 million tons of excess steel capacity globally, “it is impossible to see a decline of tariffs without significant job loss here in the US.”
The Congressional Steel Caucus is chaired by Representative Conor Lamb (Democrat, Pennsylvania), who oversaw the hearing in conjunction with Representative Mike Bost (Republican, Illinois) and Representative Rick Crawford (Republican, Arkansas).
Crawford, in his opening remarks, noted that the import market share for steel in 2019 was at its lowest since the Great Recession.
“More aggressive trade enforcement has been effective in keeping unfairly traded imports out of the US market,” Leon Topalian, president and chief investment officer of Nucor Corp, said.
Brett said that 21 million tons of finished steel was imported in 2019 - “the lowest level since 2010 and the lowest market share since 2003.”
But despite the lower market share, now is no time to go wobbly, Brett said.
After a banner year in 2018, 2019 “took a challenging turn
as consumption of our core products dropped by 4%,” he continued, noting that “declines in auto product, service center purchases and construction all contributed to a drop in our business performance.”
As a result, “average hot band prices plummeted by $230 per ton to a price lower than pre-Section 232 levels.”
Brett argued that when the US economy is stronger than the global economy, steel imports flow into the country. He pointed to the Asian financial crisis of 1997 as an example: During that crisis, imports flooded into the United States, 33 steel companies filed for bankruptcy and thousands of American steelworkers lost their jobs, Brett claimed.
“I can safely say that having the Section 232 tariffs and quotas in place is more important than ever,” he told the Congressional panel.
The United States-Mexico-Canada Agreement (USMCA) was roundly lauded
for protecting the American steel industry from foreign imports that might be routed through Mexico or Canada into the US.
There were concerns, however, that importers were finding ways around
232 tariffs and the limits contained in USMCA.
“We are concerned about the recent surges of pipe and tube products into the US from Mexico,” James Charmley, president and CEO of Bull Moose Tube and chairman of the Committee on Pipe and Tube Imports, said.
“If left unchecked, these imports could take an even greater share of the US market, resulting in job losses for domestic producers,” Charmley warned.