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Turkey’s Earthquakes Paralyze Third of Steel Output Capacity

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Archives, Global Trade Daily, Imports/Exports, International Trade

Turkey’s Earthquakes Paralyze Third of Steel Output Capacity

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Large steel mills in southern Turkey are expected to remain shut for weeks, with production lines idle and workers trying to cope with the impact of the massive twin earthquakes that shook the region.

About a dozen facilities in Iskenderun and Osmaniye — close to the epicenter of the Feb. 6 temblors — account for a third of national steel output, according to Veysel Yayan, secretary-general of the Turkish Steel Producers Association.

Although plants in the area suffered no physical damage, many workers or their family members had died, while survivors struggle to get by in makeshift conditions, he  said.

“All steelmakers in the area are closed,” he said by phone on Monday. “The plants may remain shut at least until the end of this month, or possibly until mid-March.”

Turkey is a top 10 global producer and exporter of steel, and the industry is among the first to provide an assessment of the toll from the deadliest temblors to hit the country in almost a century.

Although their impact on regional activity isn’t yet fully clear, Bloomberg Economics has estimated that addressing the aftermath may require the equivalent of 5.5% of gross domestic product in public spending.

A business group has put the economic cost of the earthquakes at over $84 billion — including damage to buildings and loss in national income. Declines in the labor force would cost another $2.9 billion, the Turkish Enterprise and Business Confederation said in a Feb. 10 report.

‘Need Calibrating’

The steel mills are facing another disruption after having to dispatch machinery and equipment to help out the rescue effort. “Cranes and some other key equipment will need calibrating” after the work ends, Yayan said.

Iskenderun Demir ve Celik AS, a unit of Turkey’s biggest steel group Erdemir, Tosyali Group’s Toscelik, Tosyali Demir Celik AS and Tosyali Toyo Celik AS, a joint venture with Japan’s Toyo Kohan Co. Ltd., MMK Metalurji, a unit of Russian Magnitogorsk Iron and Steel Works, are among companies that operate in the region.

Steelmakers elsewhere in Turkey will have to prioritize domestic demand over exports, according to Yayan. The country’s annual steel production capacity, at 55 million tons a year, is more than sufficient to cover local demand, he said.

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Surging Global Steel Demand Outpaces Recovering Production

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IndexBox has just published a new report: ‘World – Crude Steel And Steel Semi-Finished Products – Market Analysis, Forecast, Size, Trends and Insights’. Here is a summary of the report’s key findings.

The beginning of 2021 saw a sharp increase in the steel demand, while metallurgical plants were still recovering from the operational downtime incurred during the lockdown. This market disbalance leads to an increase in steel prices. The recovery of the automotive sector and other downstream industries in 2020, at a faster pace than expected, generates the conditions for robust steel demand in the medium term. 

Key Trends and Insights

In 2020, global steel demand, according to estimates from The World Steel Association, declined by ‑2.4% against the previous year. Countries worldwide were affected by this decline, but China saw demand increase by +8.0%. The Middle East (-19.0%), Africa (-16.0% ), the USMCA countries (-15.3%) and the European Union (‑15.2%) recorded the most significant annual slump in demand.

At the end of 2020, global industrial manufacturing started to recover, and in Q1 2021, the demand for steel from consuming industries began to exceed still readjusting market supply, leading to a surge in steel prices. The price of STEEL HRC FOB CHINA (ARGUS) on the London Metal Exchange surged from $685 (March 2021) to $791 per tonne (April 2021).

Lockdown during the COVID-19 pandemic resulted in most countries experiencing a significant decline in production. In April 2020, the slump in EU steel alloy output amounted to -33.3% against April 2019, emerging into recovery only in November 2020 (+5.5% against November 2019). The stagnation seen in the downstream industries, including the automotive sector, contributed to the decline in production.

Global consumption is forecast to increase in 2021 by +4.1% year-on-year. The EU (+11.0%) and other European countries (+11.9%) are projected to see the fastest rates of consumption growth, spurred by a full recovery in the automotive and construction sectors, and other downstream industries.

In line with the Paris Agreement, modern metallurgical plants now recover waste gas emissions to curtail the discharge of greenhouse gases. Proactive research is now being conducted into low-carbon technologies, such as the use of electrolysis to recover iron ore and biomass as a substitution for coal, as well as hydrogen as a reducing agent. The current market growth will promote investment for energy-efficient and low-carbon technologies, against the planned introduction by the European Union of a carbon tax, resulting in the inevitable technological upgrading and modernization of steel smelting facilities.

China to Feature Strong Stable Demand for Steel while the U.S. to Remain the Leading Importer

The global market for raw steel and steel semi-finished products increased by 7.3% to $1,246.6B in 2019. The market value increased at an average annual rate of +3.6% from 2012 to 2019.

China (995M tonnes) constituted the country with the largest volume of consumption of raw steel and steel semi-finished products, accounting for 55% of total volume. Moreover, consumption of raw steel and steel semi-finished products in China exceeded the figures recorded by the second-largest consumer, India (109M tonnes), ninefold. Japan (96M tonnes) ranked third in terms of total consumption with a 5.3% share (IndexBox estimates).

In value terms, China ($826.7B) led the market, alone. The second position in the ranking was occupied by the U.S. ($189.5B). It was followed by Russia.

The countries with the highest levels of raw steel and steel semi-finished products per capita consumption in 2019 were Japan (752 kg per person), China (682 kg per person) and Germany (483 kg per person).

In 2019, the amount of raw steel and steel semi-finished products imported worldwide reduced to 55M tonnes, waning by -12.2% on the previous year. In general, imports saw a mild contraction. The most prominent rate of growth was recorded in 2014 when imports increased by 8.2% against the previous year. Over the period under review, global imports reached the maximum at 62M tonnes in 2018, and then dropped in the following year.

In value terms, imports of raw steel and steel semi-finished products shrank markedly to $30.1B (IndexBox estimates) in 2019. Over the period under review, imports saw a noticeable setback. The pace of growth appeared the most rapid in 2018 with an increase of 26% year-to-year. Over the period under review, global imports hit record highs at $40.3B in 2012; however, from 2013 to 2019, imports remained at a lower figure.

In 2019, the U.S. (7.3M tonnes), followed by Italy (4.8M tonnes), Indonesia (4.8M tonnes), Taiwan (Chinese) (3.4M tonnes), Thailand (3.1M tonnes), the Philippines (2.7M tonnes) and Belgium (2.5M tonnes) were the key importers of raw steel and steel semi-finished products, together committing 52% of total imports. The following importers – South Korea (2.2M tonnes), Turkey (1.7M tonnes), Egypt (1.5M tonnes), France (1.5M tonnes), Spain (1.2M tonnes) and Germany (1.1M tonnes) – together made up 17% of total imports.

In value terms, the U.S. ($4.9B), Italy ($2.6B) and Indonesia ($2.2B) appeared to be the countries with the highest levels of imports in 2019, together accounting for 32% of global imports. Thailand, Taiwan (Chinese), the Philippines, Belgium, South Korea, France, Germany, Turkey, Spain and Egypt lagged somewhat behind, together accounting for a further 36%.

Source: IndexBox AI Platform

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CIT Declares Section 232 Steel Tariffs on “Derivatives” Under Proclamation 9980 Invalid and Contrary to Law

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The U.S. Court of International Trade (“CIT” or “the Court”) ruled in an opinion issued on April 5, 2021, that Proclamation 9980 subjecting steel and aluminum “derivatives” to 25 percent tariffs under Section 232 of the Trade Expansion Act of 1962 (19 U.S.C. § 1862) is invalid because of a failure to comply with statutory time limits.

The Court concluded that Proclamation 9980, which was issued by President Trump and based on the theory that the President had the power to issue the Proclamation based on earlier findings on different products, was void from the outset because it came too late and had no independent basis. As the CIT states in its opinion regarding the inability to rely on an earlier finding regarding different products: “Because the President issued Proclamation 9980 after the congressionally-delegated authority to adjust imports of the products addressed in that proclamation had expired, Proclamation 9980 was action outside of delegated authority.”

The Court’s order stated that, as a result, Plaintiff PrimeSource Building Products, Inc. is to have all its entries that were affected by Proclamation 9980 refunded, whether they were liquidated or unliquidated. This was a result of the derivatives duties being invalid from the outset. The CIT is now likely to act on the parallel challenges to the Section 232 derivative tariffs and issue similar findings. We expect consultations among the parties and with the Court to proceed soon.

This decision does not affect the original Section 232 tariffs placed on aluminum and steel pursuant to Proclamations 9704 and 9705 effective March 23, 2018. Those Proclamations were upheld by both the CIT and the U.S. Court of Appeals for the Federal Circuit and were issued in a timely manner.

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Nithya Nagarajan is a Washington-based partner with the law firm Husch Blackwell LLP. She practices in the International Trade & Supply Chain group of the firm’s Technology, Manufacturing & Transportation industry team.

Jeffrey Neeley is a Washington-based partner with the law firm Husch Blackwell LLP. He leads the firm’s International Trade Remedies team.

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Steel Import Licenses Must Include Country of “Melt and Pour”

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The U.S. Department of Commerce’s (Commerce) Steel Import Monitoring and Analysis System (SIMA) will be modified effective October 13, 2020, to require that the country where the steel was “melted and poured” to be identified in the license application. Other changes in the final rule published on September 11, 2020, include adding coverage for eight additional HTS numbers in order to synchronize the system with the coverage of Section 232 for basic steel mill products; increasing the low-value license to $5,000, and allowing multiple uses; and extending the SIMA program indefinitely.

The new rule defines “melted and poured” as “the original location where the raw steel is: (A) First produced in a steel-making furnace in a liquid state; and then (B) Poured into its first solid shape…The first solid state can take the form of either a semi-finished product (slab, billets or ingots) or a finished steel mill product.”

The reporting requirement does not apply to raw materials used in steel manufacturing. The new required information on the country of “melt and pour” may also be useful in investigating circumvention of duties.

The SIMA website will shut down from October 9 until October 13, 2020 when the new website is updated and goes live. Commerce has created a page with the latest updates regarding SIMA. In the interim, Commerce stressed that there will be limited availability for manual license processing.

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Nithya Nagarajan is a Washington-based partner with the law firm Husch Blackwell LLP. She practices in the International Trade & Supply Chain group of the firm’s Technology, Manufacturing & Transportation industry team.

Camron Greer is an Assistant Trade Analyst in Husch Blackwell LLP’s Washington D.C. office.

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U.S. Re-Imposes 10% Tariff on Specific Aluminum Imports from Canada

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On August 6, 2020, the White House issued a proclamation stating that the U.S. would re-impose 10% tariffs on imports of non-alloyed unwrought aluminum under subheading 7601.10 from Canada starting August 16, 2020.  The subject products make up the majority of U.S. aluminum imports from Canada.

President Donald Trump explained that the re-imposition of tariffs was necessary in his view, stating that:

“Canada is the largest source of United States imports of non-alloyed unwrought aluminum, accounting for nearly two-thirds of total imports of these articles from all countries in 2019 and approximately 75 percent of total imports in the first five months of 2020. The surges in imports of these articles from Canada coincides with a decrease in imports of these articles from other countries and threatens to harm domestic aluminum production and capacity utilization.”

The proclamation went on to state that “the United States will monitor for import surges of articles that continue to be exempt from the tariff proclaimed in Proclamation 9704, to ensure that exports of non-alloyed unwrought aluminum to the United States are not simply reoriented into increased exports of alloyed, further processed, or wrought aluminum articles,” the proclamation said, meaning that tariffs on additional aluminum articles could follow in the future. Additionally, under the previous agreement between the two countries, Canada is allowed to place retaliatory tariffs on U.S. aluminum products.

The White House has not stated whether or not it will reinstate the 25% tariffs on imports of steel.

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Nithya Nagarajan is a Washington-based partner with the law firm Husch Blackwell LLP. She practices in the International Trade & Supply Chain group of the firm’s Technology, Manufacturing & Transportation industry team.

Turner Kim is an Assistant Trade Analyst in Husch Blackwell LLP’s Washington D.C. office.

Camron Greer is an Assistant Trade Analyst in Husch Blackwell LLP’s Washington D.C. office.

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Commerce to Investigate Expansion of Section 232 Tariffs on Steel to Include Imports of Electrical Transformer Steel

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On Monday May 4, 2020, the Department of Commerce issued a news release announcing the start of a Section 232 investigation on imports of “Laminations and Wound Cores for Incorporation Into Transformers, Electrical Transformers, and Transformer Regulators.” This investigation is effectively an examination of whether or not to expand the current Section 232 tariffs on steel to include these products.

The announcement indicates that imports of the steel incorporated into the specifically identified transformers “are being imported into the United States in such quantities or under such circumstances as to threaten to impair the national security.” According to Commerce, it had received “inquiries and requests from multiple members of Congress as well as industry stakeholders,” to start this investigation. Similar to other 232 investigations, the Bureau of Industry and Security will conduct the investigation and request comments in a Federal Register notice that will likely be published soon.

Quoting Commerce’s press release – “transformers are part of the U.S. energy infrastructure,” and “laminations and cores made of grain-oriented electrical steel are critical transformer components. Electrical steel is necessary for power distribution transformers for all types of energy—including solar, nuclear, wind, coal, and natural gas—across the country. An assured domestic supply of these products enables the United States to respond to large power disruptions affecting civilian populations, critical infrastructure, and U.S. defense industrial production capabilities.” It is also important to note that grain-oriented electrical steel (“GOES”) was subject to antidumping duties and countervailing duty orders for several years but there are no current antidumping and countervailing duty orders on GOES.

Based upon the proposed schedule, the secretary of Commerce will notify the secretary of Defense of the investigation, as required by statute. In addition, it stated that the “Department of Commerce will conduct a thorough, fair, and transparent review to determine the effects on the national security from imports of laminations for stacked cores for incorporation into transformers, stacked and wound cores for incorporation into transformers, electrical transformers, and transformer regulators.”

In January 2020, Commerce expanded the scope of the Section 232 tariffs on Steel and Aluminum to include certain other derivative products on products such as nails and thumbtacks without conducting an investigation such as the one now seemingly being proposed. The trade remedies team at Husch Blackwell LLP represents clients now challenging that expansion in the U.S. Court of International Trade. In initiating this new investigation, it appears that Commerce has recognized that it may be on shaky ground for its earlier expansion of section 232 tariffs on steel and aluminum and may be willing to provide a fuller procedure for comments and input from interested parties.

Regardless of the procedures, however, if affected U.S. companies cannot locate the steel they need domestically, and the tariffs make importation of steel to manufacture downstream products, then the only option is to source from other countries. Thus, we expect that numerous companies will file comments on this new round of expansion of national security tariffs.

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Nithya Nagarajan is a Washington-based partner with the law firm Husch Blackwell LLP. She practices in the International Trade & Supply Chain group of the firm’s Technology, Manufacturing & Transportation industry team.

Jeffrey Neeley is a Washington-based partner with the law firm Husch Blackwell LLP. He leads the firm’s International Trade Remedies team.

Archives, Global Trade Daily, News

Steel Makers Unite to Appeal ITC Import Decision

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Washington, DC – US producers of grain-oriented electrical steel (GOES) have said they will file an appeal of the negative decision on “material injury” by the US International Trade Commission (ITC).

The AK Steel Corp., ATI Flat Rolled Producers, and the United Steelworkers Union, which represents workers engaged in the production of GOES at ATI Flat Rolled, will join forces to fight the ITC’s decision.

The International Union, United Automobile, Aerospace and Agricultural Implement Workers of America, which represents workers engaged in the production of GOES at AK Steel Corporation, also expressed its support for the appeal.

GOES is a flat-rolled alloy, specialty steel product that’s used primarily in the production of laminated cores for large and medium-sized electrical power transformers and distribution transformers.

The petitions cover GOES in either sheet or strip form, in coils or in straight lengths imported from the Czech Republic, China, South Korea, and Russia.

“We are very disappointed by the negative determination by the ITC,” said David A. Hartquist of Kelley, Drye & Warren LLP, the Washington, DC-based counsel to petitioners.

“We believe the case warranted an affirmative determination and that the majority decision contains fundamental errors of fact and law,” he said.

The Department of Commerce, he said, “found antidumping margins of up to 159 percent, which caused lost sales and significant financial injury to the US producers, which in our judgment met the legal standard for an affirmative determination.”

The petitioners also filed an appeal on September 16, 2014 to a similar ITC decision covering imports from Germany, Japan and Poland.

10/24/2014

 

Archives, Global Logistics, Global Trade Daily, News, Ocean Ports

Houston Handles Record Steel Shipments

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Houston, TX – The Port of Houston handled more steel shipments in July than in any month since 2008 as 844,000 tons of the product were handled at the port, according to Executive Director Roger Guenther.

Addressing the most recent meeting of the Port Commission of the Port of Houston Authority (PHA), Guenther also noted that the port had achieved a record with operating revenues in July 2014 of more than $24 million.

Steel and bulk cargo grew by “a solid 5 percent” in July, he said, adding that more than 22 million tons of cargo moved across PHA docks during the first seven months of the year.

Container volume was relatively flat compared to last year, but recorded a four percent increase in the number of loaded boxes year to date.

This was offset, Guenther said, “by a reduced number of empty containers being imported through PHA terminals due to an increase in loaded imports.”

Combining the strength in revenues and controlled spending, PHA has generated more than $65 million in operating cash flow for the year, a growth of 5 percent, he reported.

Following the first two quarters of 2014, the PHA said that it’s prepared a “re-forecast budget” for the remainder of the year, reflecting a $5.8 million increase in annual operating revenue, a decrease of $2.1 million in annual operating expense.

“This revenue generated will be reinvested in the infrastructure assets needed to increase capacity and provide for increased economic activity and job growth for the region,” said Guenther.

09/11/2014

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USITC Rules on ‘Oil Country Tubular Goods’ Imports

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Washington, DC –The US International Trade Commission (USITC) has determined that “a US industry is materially injured or threatened with material injury” by the import of certain oil country tubular goods (OCTG) from six countries.

The ruling on OCTG from India, Korea, Taiwan, Turkey, Ukraine, and Vietnam gives the US Department of Commerce the go-ahead to impose tariffs as high as 118 percent on the affected OCTG imports.

The determination does not impact imports of the product from the Philippines and Thailand.

OCTG imports from Saudi Arabia were dropped from the earlier complaint, which was brought in 2013 by US steel companies after imports of the pipes used in the oil and gas industry surged and foreign manufacturers sought to cash in on booming US shale gas drilling.

Seventeen US companies including United States Steel; Maverick Tube Corporation; Boomerang Tube; Energex Tube; Northwest Pipe Co.; Welded Tube, USA; and Tejas Tubular Products filed the original complaint.

The US used 7 million tons of OCTG, valued at $10.1 billion in 2013, accounting for nearly two-thirds of the US market, according to the American Iron and Steel Institute in Washington, DC.

Leading sources of OCTG last year were Korea, Canada, Argentina, Japan, Mexico, and Germany, the trade group said.

Foreign manufacturers responded to the determination saying countered that they do not supply enough pipe to threaten the US industry, and instead blamed the lower prices on US producers increasing supply.

09/02/2014