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EMEA steel players see no early end to protectionism with new US president


EU players seeking extension of import safeguards

Relations with Turkey may remain delicate

China contractors deemed winners in US Iran sanctions

  • Author
  • Viral Shah    Cenk Can    Rabia Arif    Laura Varriale    Katya Bouckley and Hector Forster
  • Editor
  • Tom Balcerek
  • Commodity
  • Metals
  • Topic
  • 2020 US Elections US Policy

European and Middle Eastern steel players see no early end to protectionism in steel markets with Democrat Joe Biden's confirmation as the next US president, market sources said after and immediately before Biden's victory in the presidential race was called over the weekend. Many however expect trade tensions with certain countries and regions will be eased.

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The Section 232 import tariffs on steel, instituted in March 2018 by President Donald Trump, are widely expected to remain with the new president, the sources believe. These led to the EU's introduction later the same year of an import safeguards scheme, which regional steelmakers are seeking to extend after its scheduled expiry in June 2021, particularly as no immediate change is expected in the Section 232 tariffs.

"We at ArcelorMittal believe that EU safeguards should continue due to global overcapacity that continues in the market, I don't expect a significant impact on the 232, considering Biden has suggested in his campaign that he will maintain 232," said Aditya Mittal, President and CFO of ArcelorMittal and CEO of ArcelorMittal Europe, in the company Q3 results call late last week.

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"For the steel industry Donald Trump will be memorable for his basket of measures aimed at restricting international trade, which is quite an unusual move for the US," said Ilya Gushin, vice president sales for Russian steelmaker NLMK. "From what we know about Biden, we believe as a president he may well be bound for measures that will ease the existing tensions [in world trade]."

"If Biden wins, we might see some slack in the trade war with China, but that's it," a Turkish mill source said. "I don't see much impact on the steel market otherwise."

European steel market assessments remained largely stable Nov. 9, confirming perceptions last week that the market was already "pricing in" a Biden win after recent price gains.

S&P Global Platts assessed North European hot-rolled coil domestic prices steady at EUR519/mt Nov. 9 while Northwest European domestic rebar prices were up EUR2.50/mt to EUR462.50/mt.

Deepsea Turkish import scrap prices were unchanged as market participants held back amid sharp lira/dollar exchange rate volatility, sources said.

Platts assessed Turkish imports of premium heavy melting scrap 1/2 (80:20) at $298/mt CFR on Nov. 9, unchanged on day.

Stimulus package

Biden's program provides for a huge short-term economic stimulus package of $2 trillion dollars, which includes infrastructure projects as well as the expansion of digitalization and renewable energies, noted Karl Haeusgen, president of the German mechanical engineering association VDMA. "The European capital goods industry should also benefit from this. However, government contracts are expected to be awarded to American companies whenever possible."

"A lot depends on the US dollar exchange rate as we understand Biden wants to start a lot of governmental projects, such as in infrastructure," an EU steel recycler said. "This means the US national debt may go up, which is not good for the exchange rate."

Relations with Turkey

Eyes will be focused on steel relations between the US and Turkey.

President Trump raised tariffs on imports of Turkish steel from 25% to 50% in August 2018 under Section 232, amid increased political tension between the countries over Turkey's detention of a US religious leader. Turkey's tariff rate on steel was dropped back to 25% in May 2019, on improved relations between the countries. Turkey's rebar exports to the US slumped to 108,300 mt in 2019, from pre-232 levels of more than 1 million mt/year, although a recovery to 363,950 mt has been reported for January-September 2020.

In turn, Turkey imposes a tariff on coal imports from the US. For coking coal, the current tariff is 5% based on a delivered basis, which was reduced from a 10% rate in 2019. The US exported 1.76 million mt of coking coal to Turkey in January-July, up by 172% on the comparative period in 2019.

Murat Cebecioglu, chairman of the International Rebar Producers' Association (Irepas), said in September he believed Turkey would not be easily able to regain pre-Section 232 steel export levels to the US as its market share has been replaced by domestic producers and by exporters from other countries including Italy, Spain and Portugal, which jumped into the gap when Turkey's tariff rose to 50%.

"Biden is likely to toughen the US stance on Turkey," a Turkey-based steel trader said. "In terms of trade policies, I don't expect any additional Section 232 measures as they would be unconstitutional. However, the US political establishment might try to put pressure on Turkey with the long-running issues of the purchases of Russian missile defense systems and the Halkbank money laundering and Iranian sanctions evading case. In doing so, however, I still believe they will still first try to win Turkey over to their side, as Turkey was and will be a strategically important ally to the US."

Turkey's vice president, Fuat Oktay, stated Nov. 8 that: "The outcome of the US elections does not have an impact on ties with Turkey, as Ankara will continue to activate diplomacy channels with the NATO ally as it always did."

Iran sanctions: Chinese winners

Some steel sector sources in Tehran believe the biggest losers of President Trump's latest rounds of sanctions against Iranian steel have been European engineering companies which have been prevented from completing or embarking on new works contracts in Iran.

"Iranian companies have worked closely with European companies such as Danieli and SMS for many years, but they were forced to turn toward China and some other countries to meet their requirements due to the US sanctions," a Tehran-based analyst said, noting that the sanctions have not stopped Iran pursuing its ambitious steel expansion program.

According to the World Steel Association, Iranian companies produced around 18 million mt of crude steel in 2016, when Trump was elected. Four years later, at the end of his term, Iran's steelmaking capacity has reached more than 32 million mt/year, official sources report.