Trump tariffs are getting relaxed for the steel market
Steel tariffs are impacting steel prices
It all started with a tough stance of shielding the US steel industry with a 25% tariffs on the US steel imports. It was tough enough that most US steel mills rushed to replenish their stocks which resulted in sending the US steel prices to its zenith.
Overwhelming exemption applications
The US Department of Commerce handling the steel tariff wavier applications received an overwhelming number of applications, and it is assessed that around 38,000 applications are still pending.
However, the results turned out different than expected. The US Department of Commerce granted tariffs exemptions to hundreds of companies. Interestingly, most of the tariff exemptions issued to the companies was a quota based where the aggregate import quota of the country reached more than 4 millions of tonnes of steel.
Initially, there were limited occasions envisaged where exemption from the steel quotas could be available during the tariff period. For instance, where companies involved in large domestic construction projects and the cost rise due to tariff could impact the US economy. In such cases, exemption request must have qualified the criteria that the cost of imported material is 10% or less of the cost of the project.
Special steel and waivers
However, it is not always about “America First” and low costs, but it is also to do with availability and capability. So far, numerous steel companies got exemptions from tariffs, because American steel companies have not been able to produce various types of steel.
Tioga Pipe received the approval to import 86,500 tonnes of steel in specific grades and sizes from China due to its unavailability in the US.
DS Containers, a manufacturer of aerosol cans also received tariff waiver to import up to 390,000 tonnes of steel from Japan and Europe.
Caterpillar Inc. is also among the companies allowed to import duty-free steel for their lifters and tractors.
So, in all of these cases, US steel producers are least interested or incapable to produce specific products.
Commodity grade steel and excess quota
No tariff exemptions observed on regular steel or semi-finished steel products until now. In the case of slabs, NLMK, California Steel Industries (CSI) and Evraz North America filed their requests to import tax-free slabs for downstream processing. However, rivals US Steel and Nucor are opposing the requests by stating that slab supply is sufficient from domestic source so there is no need to provide exemptions.
Despite the opposition to semi-finished steel and commercial grade steel, still, hundreds of steel companies are allowed to import tariff-free steel. It is estimated that steel imports declined by 11% during the first ten months of 2018 compared to the same period in 2017.
Commodity Inside research shows that the US slab importers bought beyond the 3.5 million tonnes limit last year. The US slab imports from Brazil exceeded the quota by almost nearly 2 million tonnes.
Conclusion
The significant numbers of waivers from import duties and the lack of enforcing the quota for certain countries not making the protectionist policy effective. Imports could be declined more if the tariffs remained fully effective. There are also some concerns regarding the way the waiver applicants have been handled. In such an uncertain situation round enforcing the quota, steel prices would remain highly volatile.
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