Steel 232 investigation and the Russian investigation: On a collision course?

It's likely that the US Commerce Department will soon issue its findings from the Section 232 steel import investigation. Whenever the report is shared with President Donald Trump, it will be interesting to see how imports from Russia — the focus of another investigation you may have heard a thing or two about — are treated.

Consider: Pig iron is a raw material to make steel. In its solid form, it can be re-melted in electric arc furnaces, much like steel scrap. Hardly any merchant pig iron is now made by domestic steel producers. The pig iron that can be made here — in blast furnaces — is generally all consumed by American steelmakers. Effectively, they have none to sell to others.

So given mini-mill electric furnace needs in particular, there is US demand for pig iron from offshore. And guess where most it comes from?

Russia.

In fact, Russia commanded a 59% market share into the US in April, exporting 288,081 metric tons of pig iron shipments to the US, ahead of Brazil (108,556 mt) and Ukraine (71,321 mt).

Overall, pig iron imports reached an eight-month high in April as Russia continued to dominate the market. Total US pig iron imports were 489,587 mt in April — and that's according to the Commerce Department and US International Trade Commission data.

What's more, since May of last year, Russia has exported an average of about 210,000 mt/month of other steel products to the US, for a total of about 2.5 million mt, according to The Steel Import Monitoring and Analysis (SIMA) System. SIMA, in fact, is a Commerce enforcement and compliance tool. (Check all the stats here.)

US imports of Russian steel peaked in 2014 at nearly 4.3 million mt. That annual surge led to an extension of existing antidumping duties — already in place — on some finished steel, ranging from 74% to 185% in the case of hot-rolled coil.

But most of Russia's steel products shipped to the US are semi-finished steel — blooms, billets and slabs. These intermediate products represent the next process stage beyond pig iron, and they serve as feedstock for subsequent rolling into finished products — by steel manufacturers here in the US.

Imports of Russian steel mill products have spiked in recent months: 381,032 mt in April; 264,055 mt in March and 187,656 mt in February.

To recap: Commerce's Section 232 steel investigation findings will indicate whether or not steel imports are a detriment to national security. If so, it can recommend a variety of actions — tariffs, quotas — which the President can then impose, or not.

But all signals from Trump indicate the hammer is about to drop on unfairly traded foreign steel — and soon, as he promised as recently as June 12.

What's unknown is how sweeping, or selective, any clampdown might be. Some steel products, not made here, or not critical to national security, could well be excluded. Likewise, some countries — like China — might be prime targets, while others are spared.

Add to the mix that on June 12, a group of US line pipe producers issued a statement saying Russian-owned EVRAZ North America, which produces pipe in Canada, "has taken a massive line pipe sale away from the U.S. industry and is aggressively seeking to capture other large sales, even as the Administration prepares to issue Section 232 recommendations on whether steel and steel product imports are a threat to national security." They urged that Canadian pipe imports be covered by any Section 232 actions.

If the administration does take a hard line on Russian steel imports — in particular on grounds of national security — that could help refute somewhat the broader narrative that the president is a bit too cozy with Russia, or that he's seemingly aloof about Russian cyberattacks.

But what if Russia and some of its steel product exports to the US are spared? Lordy, imagine the dust up and scrutiny that would invite regarding that other investigation.