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  • US grants exemption on steel tariffs to EU and four other countries

US grants exemption on steel tariffs to EU and four other countries

by Commodity Inside / Thursday, 22 March 2018 / Published in Steel

The Trump administration has decided to grant a temporary exemption to the EU, Argentina, Australia, Brazil, Canada, Mexico and South Korea from the punitive tariffs. However, this exemption is temporary, and the terms will be negotiated on a country by country basis. One of the points in the negotiation would be to ally with the US against Chinese trade policies, which will likely to further worsen the global trade. The tariffs are going to be challenged in WTO, though it provides an exception in cases where there is a threat to a nation’s security. So, it seems that the tariffs are fully complying the WTO rules.

The import tariffs of 25% on steel and 10% aluminium are set to come into effect on 23rd March. Exempting Brazil and Mexico will be a great relief for companies like California Steel industries and ArcelorMittal which are heavily dependent on steel slab from Brazil and Mexico. However, in the context of slab imports, Russia will be the most affected one. NLMK USA will be amongst the most affected steel producers which is sourcing slab from its parent’s companies in Russia. Its three plants in the US produce flat steel using slab shipped from NLMK Lipetsk, in addition to slab produced by NLMK USA itself. They produce HRC, CRC and galvanised steel.

Commodity Inside expects that the tariffs will send flat steel prices substantially high. On average most of the steel prices in the US are higher than other major regions. However, with the imposition of 25% tariffs, we ascertain that most of flat steel prices will climb by around $150/t.

The top four exporters of steel to the US which made up half of the 35.3 million tonnes of US imports in 2017 are Canada, Brazil, South Korea and Mexico and so far they are exempted from the tariffs. Commodity Inside believes that there would be minimal implications of tariffs on the Chinese steel industry. However, as Trump also targets China with up to $60 billion in Chinese imports. This is likely to get strong retaliation from China. Japan which is a strong ally has not been granted an exemption. We are not expecting a huge impact on the Japanese steel and aluminium industries.

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