Anti-circumvention probes on Vietnamese steel already benefitting US mills

One day before the American people went to the polls to elect their next president, the US Department of Commerce made another pivotal decision that directly benefitted domestic sheet steel producers but didn’t make for splashy headlines.

“US starts China-related anti-circumvention probes on Vietnamese steel,” the headline on Platts.com read. It doesn’t sound very exciting — not compared to all of the tumultuous Trump/Clinton presidential race coverage — but it was to those directly affected.

Just initiating two anti-circumvention inquiries on corrosion-resistant sheet steel and cold-rolled coil from Vietnam will likely be enough to thwart any interest in importing these products for the better part of a year. In this way, the anti-circumvention inquiries will be more effective than conventional antidumping and countervailing duty investigations in cutting off alleged unfair competition and in supporting domestic prices.

What domestic steelmakers alleged is that China circumvented the hard-fought, prohibitive antidumping and countervailing duty orders on corrosion-resistant, or galvanized, sheet and cold-rolled coil by shipping substrate to Vietnam and finishing the product there.

After sweeping duties took effect for sheet producers in China, South Korea and others, Vietnam emerged as one of the most — if not the most — attractive foreign supplier of these products to the US.

Vietnam was the top exporter of CRC to the US at 287,338 mt imported January-September of this year, according to final Commerce data. For hot-dip galvanized sheet and strip in that same period, Vietnam was the third largest foreign supplier to the US at 201,228 mt, after Canada and Korea. Before the anti-circumvention inquiry, acceptance of Vietnamese material and demand for it were rising. The US imported 48,693 mt of galvanized sheet from Vietnam in September — more than any month of the year.

Within 300 days of publication of the initiation decision, Commerce will determine whether the products were completed or assembled in Vietnam and circumvented the duty orders.

Now, 300 days sounds like a long time. Trade investigations in the US, like the political process, are slow. But compared to countervailing duty investigations that take 205-300 days and the more common antidumping duty investigations that last 280-420 days, a 300-day anti-circumvention investigation isn’t so long. Even better for US steel mills: Commerce may make a final determination any time between now and the deadline, and if it is affirmative, the importers will be liable for duties on any product imported after the publication of the investigation initiation.

When ArcelorMittal USA, Nucor, US Steel, AK Steel, Steel Dynamics and California Steel Industries petitioned for anti-circumvention inquiries in late September, that was enough to scare importers to cancel many orders of galvanized sheet and CRC and claim force majeure. The long lead times to the states were too risky for many traders, and they also voided any existing offers of Vietnamese material.

The impact of a new anti-circumvention inquiry is unlike that of antidumping and countervailing duty investigations, where imports often surge before they subside. Cutting off supply of Vietnamese galvanized sheet and CRC that would arrive in the first quarter could be key in helping to support domestic steel prices at a time when mills typically push for price hikes to recoup increased scrap costs and many manufacturers are at their busiest.

In the days ahead, Commerce will assess the level of investment in Vietnam’s re-rolling facilities in Vietnam as compared to basic steelmaking facilities; Vietnam’s research and development; the extent of production facilities in Vietnam compared to China; and the value of the processing in Vietnam relative to the proportion of the value of the imported product.

Trader sources have said the domestic steelmakers’ case will not be easy, given that Vietnam imports substrate from South Korea and Japan and the differences in applications and prices amongst the three main sheet steel products, hot-rolled coil, cold-rolled coil and galvanized sheet.

If the petitioning steelmakers fail in their pursuit to include the downstream sheet imports from Vietnam under the umbrella of Chinese duties, they can always file for trusty antidumping and countervailing duties.