Enforcing existing US trade laws and closing loopholes that allow for the circumvention of steel imports will be critical in allowing the US domestic steel industry to recover from the effects of the coronavirus, Kevin Dempsey, American Iron and Steel Institute interim CEO, said in an interview with S&P Global Platts.
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Dempsey, who was named interim CEO in June, previously served as the group's president for public policy and general counsel. Prior to joining the AISI in 2009, he worked as a trade attorney and was involved with the Section 201 hearings and litigation when President George W. Bush's administration applied tariffs to foreign steel in 2002.
A lesson he has learned that he hopes the industry heeds amid the cornoavirus pandemic is that when there are periods of sudden economic shock, it presents an opportunity for imports to surge, Dempsey said.
"One of the things I learned from that is you need to be ready when you have these periods of sudden shocks," Dempsey said. "...When you're in one of these big economic-wide crises like we're facing now with COVID, the demand shock part of it is very similar to what we've seen before. Don't forget about enforcing the trade laws and don't forget about the potential for new import surges."
Dempsey pointed to the 1997 Asian financial crisis, which caused the collapse of steel demand and led to a surge of exports to the US, ultimately leading to US steel company bankruptcies and the Bush administration's move to enact the Section 201 steel tariffs.
Similarly, the global financial crisis of 2007-2008 led to another rise in steel imports.
"[The crisis] certainly hit steel hard, and as we tried to recover from that, we saw everywhere around the world people were just flooding in as much steel as they could in the US to take all of that demand from the recovery that we saw," Dempsey said. "We faced years of these repeated surges. Every time the US economy improved, imports came in and took all of the growth."
Dempsey said he sees the coronavirus crisis as another inflection point for steel.
"I think we're at one of those critical points here today because the US has cut way back in how much steel we're producing in response to demand conditions," Dempsey said, noting that production has been cut similarly in the EU and Japan. The biggest concern is that China is continuing to produce steel at a high level, with production hitting record highs in the early months of 2020, he said.
Over January-June, China's pig iron and crude steel output increased by 2.2% and 1.4% on the year to 432.68 million mt and 499.01 million mt, respectively, National Bureau of Statistics data released July 16 showed. On an annualized basis, pig iron reached 932 million mt and crude steel 1.114 million mt over the first half of the year. China appears to be well on track to breach 1 billion mt crude steel output in 2020, as Platts previously reported.
To date, exports from China have not yet surged, with steel exports from the country falling 58% on the year in June, indicating that the domestic market absorbed most of the country's soaring production.
"We have not seen a surge in exports from China, but we are hearing anecdotal reports of inventory builds so we have to be ready," Dempsey said. "We can't lose sight of the trade threats when everyone is focused domestically on combating COVID."