World steel markets unfazed by Trump’s tariff
The 25 per cent US tariffs on steel imports has raised fears of a global trade war but steel producers outside North America believe they can weather the storm without too much disruption to their business or steel prices. While the United States imported 36 million tonnes of steel in 2017, with Canada, Brazil and South Korea the leading suppliers, that was less than 8 per cent of global steel market traded volumes of 473 million tonnes during the year.
Also, while tariffs would price some imports out of the US market, analysts at consultants Wood Mackenzie estimate that at most 18 million tonnes would be diverted to other markets — or less than 4 per cent of annual traded volumes.
“The volume is relatively small and won’t have a big impact on prices,” said Roberto Cola, Vice President of the Asean Iron and Steel Council, which represents steelmakers in Southeast Asia.
“It’s not the commodity, it’s the act of unilaterally imposing tariffs. Nobody does that. Usually there’s a process, there are trade remedies. This is out of the ordinary. It so happened there’s a strong steel lobby in the US,” said Cola.
Chinese steel prices, which drive global prices, are still nearly 40 per cent higher than when Trump first launched his “Section 232” investigation in April into whether steel and aluminium imports threatened US national security.
Capital Economics chief commodities economist Caroline Bain said global markets and US trading partners were on edge because they feared the new tariffs were the first of many to come, rather than over concerns about the metals sector.
The research house expects US steel to end 2018 at $700 per tonne, up from $476 a tonne before Trump was elected in October 2016, but believes Chinese prices won’t be hit because the its steel exports to the United States have collapsed.
Despite the decline in Chinese steel exports in recent years, analysts say Trump’s tariffs are first and foremost aimed at China.
Its industrial expansion created massive overcapacity in the steel sector and surging exports, which forced some producers to export to markets such as the United States, weighed on global steel prices, and hurt US steelmakers.
The US president has blamed subsidised or unfairly traded industrial goods from China for decimating US industries such as steel and coal and he ran for election on a ticket of restoring blue collar jobs.
Still, the United States already has 29 duties in place against Chinese steel products. Last year, China’s steel exports to the United States fell to just 1 per cent of its total steel exports. The China Iron and Steel Association, the powerful industry body in a country that produces half the world’s steel, said the tariffs would have little impact. China only exports 0.1 per cent of its overall output to the United States.
By contrast, steel markets in Europe, a key US ally, have more to lose.
According to European steel association EUROFER, 15 per cent of Europe’s steel exports went to the United States in 2017. The bloc also fears steel exported to the United States from other countries could be redirected to Europe after tariffs come in.
Still, analysts say the risks are contained even for Europe as it could be protected from redirected steel thanks to so-called safeguarding measures Brussels is considering.
“The EU has talked publicly of enacting safeguard duties. Safeguards would replicate the protections in the US and lead to a protected EU market above and beyond what we’re looking at today,” said Jefferies analyst Seth Rosenfeld.
He said that when former US President George W Bush instituted tariffs on steel imports in 2002, EU safeguards fully mitigated the risk of redirected imports and supported gradual but robust growth in the EU steel industry.
Tata Steel Europe said: “We welcome the announcement of the European Commission that appropriate and swift measures will be taken to safeguard our industry.”
“The EU must not allow the moderate recovery in our industry to be destroyed by the EU’S most important political ally.”
The Steel Exporters Association in Turkey, the sixth-biggest exporter to the United States said it did not expect a significant impact from the US tariffs.
Russia, the fifth-biggest, said it expected some damage from US duties, but said it would hit less than the EU and China. Ratings agency Moody’s said Russian steelmakers’ exposure to the United States was either insignificant in terms of exports, or stemmed from their ownership of production facilities in the country.
THE US PRESIDENT HAS BLAMED SUBSIDISED OR UNFAIRLY TRADED INDUSTRIAL GOODS FROM CHINA FOR DECIMATING US INDUSTRIES SUCH AS STEEL AND COAL AND HE RAN FOR ELECTION ON A TICKET OF RESTORING BLUE COLLAR JOBS