Everything You Need to Know About the Potential Trade Cases in 3 Minutes
How did the trade case discussion start?
1. The end of Q1 2014 exposes a definite increase in imports, particularly on the coated side.
Hot-dipped galv imports went up 67% from 2013.
Total flat-rolled imports went up 60% year-over-year in 2014.
2. Rumblings of potential trade case filings pick up in mid-2014.
3. Q1 2015 sees even higher levels of galv imports.
Total flat-rolled imports up another 29% year-over-year for Q1 2015.
4. Domestic demand still continues to improve, though domestic producers are complaining that unfairly dumped imports are causing them to lose market share.
What would it mean for the US economy and the steel industry if trade cases aren’t filed?
If these trade cases are not filed, it will severely limit the ability for the domestic producers to make profit. In that case, domestic producers would have to lean out production, thus cutting jobs in order to cut costs to stay competitive, which could have a negative effect on the economy.
How likely is it that these trade cases will be filed soon?
While US Steel CEO Mario Longhi says it is not “if” but “when,” the market remains skeptical.
Are there any indicators of which way this may go?
The EU just filed a CRC case against Russia and China, which is a strong indication that the U.S. will follow suit. It’s also thought to be a unique time in the industry – due to Chinese overcapacity, the issue is much larger than it was even 15 years ago.
What would it mean for the global economy if the US files trade cases against some of the biggest offenders?
If the U.S. files trade cases against some of the biggest offenders (China, South Korea and India), it would push their excess supply (of which there is plenty) to other regions like the EU, Vietnam, Canada and Mexico.
The push of material to other regions could in turn lead these other regions to send their material to the U.S.
Without fixing the root of the problem – the overproduction from irresponsible nations – this excess will continue to have a domino effect on the rest of world.
What are the negatives/positives to filing a trade case?
The main positive of filing the trade cases would be to help push cheaper, subsidized foreign imports out of the market. This would allow the domestic producers to regain market share, push pricing higher and help encourage healthy books.
On the negative side, other steel products like OCTG, cold rolled sheet, wire rod, bars and line pipe that we rely on domestically from countries like China, India and S. Korea could be affected.
The geopolitical arena could also be affected in two big ways:
1. The US relies on China for so much besides steel (apparel, furniture, food) that any disruption could negatively impact that trade.
2. The US wants to stay on China’s good side – as China is a key player globally, it’s important that we’re in good standing with one another.
Even if trade cases are filed in this scenario, isn’t it a matter of time until another threat comes to a head?
Yes. A trade case would eventually push Chinese, Indian and Korean material elsewhere to places like Turkey, Italy, Canada and Mexico.
Those countries would then be forced to push excess material to the U.S. and we could be back to square one.
Are there any historical cases we can examine to understand how this might play out?
There are historical cases where this has worked such as in the July 1999 case of hot-rolled material from Russia in addition to China’s October 2007 ruling.
In the recent case against OCTG material from South Korea, this didn’t work because there was a lack of threat against the importers.
The anti-dumping duty was set at such a low level that most importers laughed it off, which kept them importing into the U.S. The lack of backing from the Global Trade Commission also helped the ruling to fail.
In the end, it all depends on how the importers respect the ruling and fear the reprimands of bringing in material.