Steel companies have had their share of victories in their battle against what they claim are “unfairly traded” steel products. Steel companies have managed to get duties imposed against several Chinese steel products. In a significant case last year, duties were imposed on OCTG (oil country tubular goods) from South Korea (EWY). However, South Korea has challenged the ruling before the World Trade Organization, or WTO.
US Steel companies are banking on a positive ruling in the hot-rolled and cold-rolled trade cases to further stem steel imports. In the preliminary ruling, the US ITC (International Trade Commission) found damage to the domestic steel industry in both cases. AK Steel (AKS), ArcelorMittal (MT), United States Steel (X), and Nucor (NUE) were the petitioners in the hot-rolled coil case. The final ruling on the case is expected in December.
Would it help?
The steel industry’s challenges have now gone beyond steel imports. The prices of other industrial metals, including copper and aluminum, have also crashed in the last six months. This is a problem of a global slowdown and excess steel capacity.
The Steel industry’s capacity utilization fell 68.3% in October as can be seen in the graph above. A ratio of 80% is regarded as healthy by analysts. Excess steel production capacity would push steel mills globally to produce more of the metal in a bid to achieve optimum utilization ratios. Steel overproduction would only add to the glut of steel in international markets, further depressing steel prices.
Low global steel prices would keep a lid on US steel prices as well. Even if US steel companies manage to get duties imposed on some countries, imports might rise from other countries. A similar thing happened in the OCTG, where South Korean exports to the US rose after anti-dumping duty was imposed on Chinese products.