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June 5, 2017

MSCI Tells Trump Administration That Global Excess Steel Capacity Threatens Industry

The Metals Service Center Institute last week submitted written testimony in the U.S. Commerce Department’s Section 232 steel investigation. (Click here for background on this investigation.) In the testimony, President and CEO M. Robert Weidner told federal officials that they should continue current enforcement strategies and provide the same relief for downstream and upstream domestic producers. Weidner also said NAFTA countries should be excluded from any actions that result from the Trump administration’s Section 232 investigations. 

“MSCI believes the health of the U.S. domestic steel industry is critical to the entire U.S. manufacturing sector and the broader U.S. economy … Problems posed by foreign government-sponsored capacity expansion demand response from the U.S. government,” Weidner said. The decline of service center shipments leaves no question that the U.S. steel industry has suffered from unfair trade practices. Carbon steel shipments from MSCI member companies in 2016 were only 66 percent of peak shipments before the 2008 recession. 

“The U.S. government has rightfully imposed tariffs on various metals from countries that it has deemed to be unfairly subsidizing its metal exports to the United States,” Weidner explained. “However, there is growing evidence that, in an attempt to circumvent those rightfully imposed duties, the Chinese and others are simply processing that same steel into steel parts. These countries cannot be allowed to continue to circumvent U.S. rules and regulations.” 

To address this circumvention, MSCI told federal officials that they should provide relief for producers up and down the supply chain and also should consider consequences of any new trade policy, including:

  • The economic impact of global overcapacity on the entire domestic metals supply chain;
  • Transition times and implementation rules to any new policy;
  • Availability of domestic metals to meet U.S. national security needs, as well as general industrial and consumer demand; and
  • Trade flows under current free trade agreements, including NAFTA, where the written testimony requested the exclusion of Canada and Mexico from trade penalties resulting from the 232 investigation on steel.

Officials from Canada also urged the Trump administration to exclude NAFTA imports from any Section 232 remedies. Hanna Wajda, a spokesperson for the Canadian Embassy in Washington, DC, told Politico, “Canada is a stable and reliable source of aluminum, in close proximity to the American market … It's a valuable asset coming from a close ally. On steel, any measures taken against Canada would harm U.S. companies that rely on long-term contracts and just in time delivery from Canadian mills, especially the auto sector. This would create havoc on both sides of the border.” A U.S. Commerce Department official said last week that the agency has not yet made a decision yet on whether it would include a carve out for NAFTA counties. 

In MSCI’s testimony, Weidner concluded, “The causes of global excess capacity must be addressed to ensure a thriving North American industrial metals manufacturing industry, a healthy American economy and a secure nation … If the U.S. does not address this problem now, it will only get worse.” 

Click here to read the full testimony.