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New York - Imports of some corrosive-resistant steel from China may be taxed as much as 236% based on the level of subsidies they receive, according to a preliminary finding by the US Department of Commerce.
The department found five Chinese exporters including Angang Group Hong Kong and Baoshan Iron & Steel got subsidies of that amount, it said in an emailed statement. US Customs and Border Protection will be instructed to require cash deposits based on the subsidy rates.
The preliminary finding is the first decision in three sets of trade cases that US steel producers have filed this year, as a glut of output from foreign producers led by China has pushed down prices to nine-year lows and seen US mills idle 31% of capacity.
If validated, the decision may end some imports and help lift domestic prices.
“Trade cases will have an impact by limiting tons showing up in the US,” Timna Tanners, an analyst at Bank of America, said on Tuesday before the decision was made public. “If you take out the lowest-priced tons in the US, those offers going away should tighten the market.”
The move will curb Chinese exports to North America, Wang Yingsheng, deputy secretary-general at the China Iron & Steel Association, said from Beijing, while estimating the US takes only about 3% of overseas sales. Shipments are facing increasing trade friction globally and probably won’t exceed 100 million metric tons in 2015, he said by phone.
Sales surged 27% to 83 million tons in the first nine months.
Surging imports
The five Chinese companies that were determined to get subsidies of 236% didn’t participate in the probe. Another company, Yieh Phui (China) Technomaterial, received a subsidy rate of 26.3%, the Department of Commerce found.
Baoshan Iron & Steel couldn’t immediately comment, while Hebei Iron & Steel declined to comment.
Companies from India were subsidized as much as 7.7% while Italy supported exports by as much as 38.4%, according to the preliminary findings. Exports from South Korea received as much as 1.4% subsidies, while shipments from Taiwan had minimal support, it said.
On June 3, six domestic steel producers including Nucor and US Steel filed cases against anti-corrosive steel from China, South Korea, India, Italy and Taiwan.
Imports of the anti-corrosive steel from the five target countries surged by 84% in 2014, while imports of all steel products jumped by 38% to 40.2 million tons, according to the US Census Bureau.
Nucor shares fell 0.3% in New York on Tuesday while US Steel rose 0.9%. The latter’s shares slumped after the close of normal trading when it reported a quarterly loss that was more than three times bigger than the average analyst estimate.
Sending message
John Ferriola, Nucor’s chief executive officer, said the company believes the duty will have an impact on Chinese steel shipments and it was a good sign for cases still outstanding.
“People were hoping for higher duties,” Lee McMillan, an analyst at Clarksons Platou, said in an interview Tuesday. “It looks like the South Korea ones are pretty much de minimus and there is apparently nothing from Taiwan,” McMillan said “People expected really high ones from the Chinese, so that is in line.”
Anti-corrosive steel is a form of the metal that has been galvanized, coated with zinc, aluminum or other treatments to keep it from rusting.
On October 30, the Department of Commerce found that at the beginning of the investigation, imports jumped from four of the five countries, China, South Korea, Taiwan and Italy.
Such a finding of so-called critical circumstances allows the department to enact retroactive duties on those shipments. Commerce is scheduled to issue estimates of anti-dumping duties in the case on December 21.
The decision may suppress further shipments, Tanners said.
“This is a message to other countries that there could be retroactive tariffs,” she said.
