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US lowers 2020 import quota for Brazilian semi-finished steel

Highlights

Trump issued a proclamation late Aug. 28 announcing change

Semis quota lowered to 60,000 mt, down from 350,000 mt

Discussions on 2021 quotas to happen in December

New York — The United States lowered its import quota for shipments of semi-finished steel from Brazil for the remainder of 2020, amid challenging conditions in the domestic market, according to a presidential proclamation issued late Aug. 28.

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Due to the depressed conditions, the remaining quota for Brazilian semi-finished steel products has been lowered to 60,000 mt, down from 350,000 mt, according to the US-based Steel Manufacturers Association (SMA).

Brazil is the second-largest source of steel imports to the US and the largest source of imports of semi-finished steel products, according to the proclamation.

US President Donald Trump states in the proclamation that he was informed of "significant" changes in the US steel market since the US and Brazil reached an agreement on a hard quota system in lieu of the 25% import tariff on steel, implemented by the Trump administration in March 2018 under Section 232 of the Trade Expansion Act of 1962.

"The United States steel market has contracted in 2020," the proclamation states. "After increasing in 2018 and 2019, steel shipments by domestic producers through June of this year are approximately 15% lower than shipments for the same time period in 2019, with shipments in April and May of this year more than 30% lower than the shipments in the same months in 2019."

The proclamation also notes that US steelmakers' adjusted year-to-date capacity utilization rate through Aug. 15 is below 70% and the current rate has been near or low 60% since the second week of April.

As a result of the change, the Department of Commerce, on an expedited basis, can grant relief from the quota applicable to Brazilian blooms, billets and slabs (subheading 9903.80.57 of sub-chapter III of chapter 99 of the HTSUS), for orders that have already been contracted for delivery in the fourth quarter of this year, according to the proclamation.

"For calendar year 2021 and for subsequent years, the annual aggregate limit for Brazil shall revert to the aggregate limit [previously set for Brazil] unless that limit is further modified or terminated," sates the proclamation.

The US and Brazil will meet in December to discuss imports and quotas for 2021.

Additionally, Mexico agreed Aug. 28 to implement a strict export monitoring regime through June 2021 for standard pipe, mechanical tubing, and semi-finished products, S&P Global Platts reported earlier.

"We are pleased to see the administration is taking proactive steps in continuing its support of our country's steel industry and our American workers," Philip Bell, president of the SMA said in a statement.

Kevin Dempsey, interim CEO of the American Iron and Steel Association noted that while there has been some modest recovery in the US steel market, the industry continues to face significant challenges due to the sharp drop in demand as a result of the coronavirus pandemic.

"So far in 2020, raw steel production is down 20% compared to the same period last year and steelmaking capacity utilization has only averaged approximately 66% this year so far, compared to nearly 81% during the same period last year," Dempsey said in a statement.

"These difficult conditions make the industry even more vulnerable to surges in imports."