Further Uncertainty Created by Section 232 Exemptions
US steel mills lifted selling figures rapidly, in recent months, due to the expectation of rising import prices and supply shortages, following the Section 232 investigation. After the announcement of a blanket 25 percent tariff, it was specified that NAFTA partners, Canada and Mexico, would be excluded from the measures. Subsequently, a number of countries sent delegations to the US to discuss the possibility of exemptions.
On March 22, the day before the tariffs went into effect, Trade Representative Robert Lighthizer stated that the imposition of duties would be “paused” for material sourced from the European Union, Argentina, Australia, Brazil and South Korea, while further discussions take place. It is expected that other nations, such as Japan, may attempt to petition the US authorities for a temporary reprieve. Despite the exclusions, US steelmakers are expected to continue to attempt to lift selling prices, in the coming months, as delivery lead times extend.
The manner by which the policy has been implemented has caused a great deal of uncertainty for supply chain participants, both in the US and globally. Domestic end-users voiced their concerns that elevated steel prices would result in a loss of competitiveness. Steel mills worldwide feared that imports would be redirected into their local market. Furthermore, the blunt nature of the proposed 25 percent tariff did not take into account the complexities of the steel sector. A number of finished steel products are not produced in sufficient quantity, in the US, to meet local market requirements. Furthermore, steel slabs imported by re-rollers, predominantly those located on the West Coast, are a fundamental part of the supply chain.
The appeals process for exclusions was formalised just days before the tariffs came into effect. The market is now likely to endure further uncertainty, in the coming months, as the full extent of the measures are revealed.
Source: MEPS – International Steel Review – March 2018 Edition