Real demand is still flat and US steelmakers appear to be facing a “perfect storm” — a good one, this time.
Whether it’s Adam Smith’s “invisible hand” or some kind of global steel zeitgeist, things are all of a sudden looking great for US mills, just in time for the seasonally strong second quarter.
One of the biggest boosts is coming from actions set in motion last year: unfair trade cases filed by domestic producers against sheet steel imports from 11 countries.
The US Commerce Department last week announced long-awaited preliminary dumping duties of 4-49% on imports of hot-rolled coil, the largest and most contentious market among steel products. This important determination came on the heels of the establishment of provisional duties of 2-266% on cold-rolled coil and 3-256% on hot-dip galvanized sheet, the other two major sheet steel products. Taken together they represent roughly half of all American steel shipments.
Subsidy-remedying countervailing duties were also established. These too are preliminary, but they are just as costly to importers who must make cash deposits in the amounts of the duties, pending final determinations.
Furthermore, some of the sheet duties, against the most allegedly egregious offenders, were made retroactive by 90 days.
The high ends of the duty ranges on CRC and HDG belong to Chinese exporters. The HRC duty range in this most recent round of trade case filings is modest by comparison because China had already been assessed similarly high HRC duties from a previous round of filings.
This trade litigation success is being followed by surprising recent strength in global steel markets and a boost in US scrap prices, which will help mills justify the finished steel price hikes they recently put into play. US scrap prices moved up $20/lt the first week of March and look likely to rise by at least that amount during the April buy week.
Finally, US mill production cuts made late last year and early this year — along with a drying up of imports due to the trade case filings — have apparently reduced supply to a point of inflection. In the words of one sheet buyer, a “rude awakening” awaits those who managed to avoid earlier US mill price hikes only to face much more substantial ones today.
It’s not just sheet makers experiencing a harmonic convergence of positive developments. One buyer of plate steel, citing rising scrap costs, low inventories, longer mill delivery lead times and pending trade cases, likened the producers’ current situation to the planets lining up, and then added another analogy: “The pendulum has swung to the mill side of things.”
Whether it’s swinging pendulums, planetary shifts or meteorological phenomena, it seems clear that US steelmakers, after many months of struggling, can count their lucky stars.