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Kallanish Kallanish

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October, 21st 2018

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JUN 11
16:38

US tariff exemptions removal stabilises longs market: Irepas

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The removal of US tariff exemptions for the EU, Canada and Mexico should bring stability to the global long products market in the short term, but uncertainty over 232 persists. So says the International Rebar Exporters and Producers Association (Irepas) in its June short-range outlook.

It is highly likely the US will import more steel in 2018 than in 2017, as no US buyers have so far cancelled orders despite being told by EU, Canadian and Mexican suppliers that they will charge the additional 25% duty.

“Steel consumers in the US pay more and become even more uncompetitive with their finished/assembled products,” Irepas says in the outlook sent to Kallanish. “Obviously, NAFTA inefficiencies are automatically going to occur as the free trade in the NAFTA area had created efficient use of capacity. The new situation will cause rises in prices and as well as resulting in some shortages and late deliveries.”

Mexico has already imposed tit-for-tat countermeasures on the US, as will the EU and Canada later in June.

The supply of certain sizes is limited in some areas in the US. Now that there is a level playing field for all imports, US domestic mills are expected to adjust their prices so that they are in line with or slightly higher than import prices. Until then, uncertainty still exists and is holding buyers back from making long-term decisions.

“Of course, the US decision is a relief for Turkish mills who were not exempt from the tariffs during May,” Irepas continues. “This will strengthen the competiveness of Turkish mills and bring them back to the US import market, which in turn will also bring the Turkish mills back to the scrap market.”

Likely US rebar price increases in the coming weeks could put pressure on international scrap prices and consequently on the production costs of Turkish and European mills. This could lead to a rebound in apparent demand for steel products, linked to the possibility of further price increases. A similar thing happened last year when the sudden increase in graphite electrode prices pushed up production costs.