US steel groups urge Biden to keep Section 232 tariffs amid cooperation with EU

A coalition of US steel groups appealed to President Joe Biden to maintain US Section 232 tariffs on steel imports on May 19, a day after the EU said it would suspend its own duties for some US steel imports. The EU's move came after the two sides had agreed to together address global excess capacity.

"Eliminating the steel tariffs now would undermine the viability of our industry," the US group said in a letter sent to Biden. "Global steel overcapacity has only increased during the pandemic, and past economic crises have led to devastating import surges as other nations dumped their excess steel into the US market," said the letter, signed by the American Iron and Steel Institute, Steel Manufacturers Association, United Steelworkers, Specialty Steel Industry of North America, American Institute of Steel Construction, Alliance for American Manufacturing and The Committee on Pipe and Tube Imports.

The 25% US import tariff on steel has been "a success," allowing the domestic industry to restart idled mills, rehire laid-off workers and invest in the future, the groups said. Since the tariffs were enacted by former President Donald Trump in March 2018, domestic steel producers have announced plans to invest more than $15.7 billion in new or upgraded facilities, according to the groups.

"The tariffs have resulted in increases in capacity utilization and investments that will modernize the American steel industry, preserve jobs and lead to more sustainable steelmaking," Philip Bell, president of the Steel Manufacturers Association, said in a statement. "A fact, that often goes unrecognized, is the tariffs have dramatically reduced the amount of high CO2 emitting foreign steel that comes to our shores."

The appeal to Biden comes two days after the US Trade Representative's Office, the Commerce Department and the European Commission on May 17 announced they would collaborate on finding effective solutions to address global steel and aluminum excess capacity and to put an end to their World Trade Organization disputes by the end of this year.

Pandemic tightens supplies

Opponents of the steel tariffs argue that they should be eliminated to increase supply, given the current environment of rising prices and long lead times, however the groups said this is a temporary situation that is not unique to steel or the US in particular.

But such objections, according to the US steel groups in their letter, ignore "that the COVID-19 pandemic has posed unprecedented, but temporary, challenges to global supply chains in many industries — including lumber, semiconductors, concrete, agricultural products and cleaning products — as manufacturers respond to rapid and unpredictable shifts in customer demand and logistical difficulties."

Virtually every steel market around the world is experiencing record high prices and long local lead times, they added.

US hot-rolled coil prices hit an all-time high May 19, with the daily Platts TSI US HRC index rising $20.25/st on the day to $1,571/st. Year to date, US HRC prices have risen 50% and are up by roughly 245% compared with a low of $440/st in late July 2020, according to Platts pricing data.

Average HRC lead times, meanwhile, have remained above a historically rare eight-week average since mid-October 2020. US mills' average HRC lead times also remain elevated, with lead times for HRC steady at 8.7 weeks, Platts data showed May 19.

Despite the current challenges in the market, the steel groups argue the tariffs are providing a fairer and more level playing field, "creating the market stability needed for companies to invest in the future of the domestic steel industry, including a significant amount of new steelmaking capacity that has come on line very recently."

"The administration has a choice. It can regress to the failed policies of the past that lead to subsidies and global excess steel capacity by China and other countries around the globe, or it can leave the tariffs in place while it collaborates with industry, labor and our allies to find a workable path forward," Bell said.

EU suspends rebalancing duties

The EU said May 18 it would suspend application of "rebalancing" duties originally scheduled to be charged on imports of some US products effective June 1 in the "spirit of cooperation between the two strategic partners."

The EC introduced rebalancing duties in June 2018 in response to the US Section 232 tariffs on steel and aluminum imports from the EU, Canada and Mexico in March 2018. The rebalancing duties initially targeted a list of products worth Eur2.8 billion and were scheduled to target a further Eur3.6 billion worth of trade as from June 1. It is this "second tranche" of rebalancing measures that has now been suspended, an EC spokesperson confirmed to Platts May 18.

Some market sources believe the non-application of additional rebalancing measures could herald an easing by the Biden administration of US Section 232 tariffs, particularly in the light of recent skyrocketing steel prices and tight supplies in the US market, in addition to a surge in aluminum prices. Fear of price inflation is growing in the US, where inflation levels of an annualized rate of 4.2% in the 12 months to April were reportedly the highest since 2008. High import tariffs inevitably contribute to product price inflation.

Any near-term impact from a tariff removal, however, was expected to be limited due to current supply tightness in Europe.

North European HRC prices were heard higher May 19, with one Italy-based trader confirming a market-leading mill raised offers for HRC to Eur1,150/mt delivered Europe, and CRC and HDG prices to Eur1,300/mt delivered Europe.

The price increases come amid acute supply shortages in the region, with little relief from imports, as buyers grow more uncertain over the viability and convenience of imported material, sources said.

A Benelux service center source said they did not expect European production to improve in the near term, with some producers undergoing maintenance during July-August. This was likely to prop up prices until next year, with mills not in the position to produce more steel.

Platts assessed Northwest European hot-rolled coil stable at Eur1,100/mt ($1,343.79/mt) ex-works Ruhr May 19.