US closes to North Asian steel

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The US is increasingly moving to close its markets to North Asian steel producers. From Bloomie over the weekend:

The Obama administration imposed duties on steel pipe from South Korea and eight other nations in a victory for U.S. Steel Corp. (X) and the United Steelworkers union, which said they were hurt by unfair competition from overseas. U.S. Steel rose 3.2 percent in New York trading.

…“We applaud their decision to prevent further gamesmanship of our laws and to secure our nation’s economy,” U.S. Steel Chief Executive Officer Mario Longhi said today in a statement.

The Commerce Department determined the steel pipe had been sold in the U.S. below cost, or dumped, in violation of international trade rules, after the steel industry filed a complaint.

Those affected include:

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South Korea has been by far the dominant shipper, with India, Vietnam and Turkey also showing substantial increases. The biggest dumping duty, 118%, would be levied on steel from Thailand, which had the smallest share of imports to the U.S. among the nine countries. The other affected countries are the Philippines, Saudi Arabia, Taiwan and Ukraine.

Korean tubular steel from Hyundai Hysco, a unit of the car company Hyundai, and another firm called Nexteel would be hit with dumping duties of 15.75% and 9.89%, respectively. These were a reversal from the Commerce Department’s preliminary finding this year that no tariffs would be placed on South Korea.

China is already locked out of US markets in these tubular goods, owing 2010 tariffs. The rationale behind the barriers is that the energy boom is bi-passing US steelmakers for cheaper foreign steel.

A lot of the affected nations are customers of Australian iron ore so we’ll see a corresponding fall iron ore demand given this steel is basically being produced below cost in a market that is massively overproducing worldwide.

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And it is only the beginning. The tubular products ban is a beach head for tariffs on more products that will include Chinese sheet products and wire rod output. Steel First is reporting that sales from a broad suite of Chinese steel products are already stalling owing to the risk of wider bans.

The Chinese reform project and property slowdown is triggering a global shakeout in steel production and steel protectionism is underway and accelerating. More markets will close to North Asian steel as the huge glut promotes a global price war. As prices fall and production eases, steel mills will again jam the deflation into their own supply chains, including iron ore.

About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.