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Rocketing steel prices make US import restraints inneffective
September 2002
The Section 201 decision is likely to achieve just 25 percent of the intended import restrictions this year. Punitive tariffs affect approximately 8 million tonnes of foreign finished steel products. In the first six months of the year, the decrease was less than 0.8 million tonnes (0.9 million tons). The final figure for 2002 is not expected to reach 2 million tonnes (2.2 million tons).
Why has this happened? According to MEPS Internationa, the most important factor has been the massive price increases in the US flat products segment this year. The rises for hot rolled coil, cold rolled and hot dipped galvanised material have been in excess of the 30 percent tariffs imposed on most of the traditional suppliers from outside the NAFTA region.
Virtually all producers from countries exempted from the tariffs have expanded sales to the US. The higher selling prices have attracted suppliers from the Middle East, Africa and South America. Canadian and Mexican mills have also been able to gain both price and volume. It is like Christmas Day every day for these steelmakers. Current prices and increased exports could only have been a distant dream for them just six months ago.
At the mid point of the year, imports of hot rolled strip are reported to be up 38 percent. Hot dipped galvanised foreign supplies are 20 percent higher. Cold rolled exporters reduced their sales to the US ahead of the recent anti-dumping decision. Many traditional suppliers to US consumers have been encouraged to continue deliveries because long term relationships were built by the provision of good quality and service.
As MEPS has stated in the past, the big losers in this exercise have been the US steel consuming companies. They are becoming less competitive in global markets due to the high prices paid for their steel raw material. Many manufacturing companies will suffer increasing imports and will be faced with purchasing components from outside the US. This will lead to job losses in the US and a declining demand for steel for the local producers.
The pricing difficulties facing the US industrial sector can be seen from our comparative price tables. Domestic US prices for strip mill products are $US 60/70 per tonne above the world average values. Asian figures are approximately $US 90/115 per tonne lower than US prices.
After five months of the Section 201 tariffs, utterings of complaint are starting to be made. Is it worth saving steelworkers jobs in an inefficient industry at the expense of those in the manufacturing sector - brought on by excessive steel prices? These questions are now being raised. Moreover, it is difficult to understand how a more profitable steel industry would lead to consolidation. The reverse is more likely.
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