Back

April 4, 2016

MSCI Tells U.S. Trade Representative It Must Address Global Steel Oversupply

Last Tuesday, the Metals Service Center Institute (MSCI) responded to an Office of the U.S. Trade Representative (USTR) call for comment on policy recommendations on the global steel industry. 

In its comments, MSCI argued, “The global steel industry today is confronting significant challenges as a result of the growing disjunction between global steelmaking capacity and global steel demand” and noted “the causes of the current conditions are not a mystery. The disjunction between capacity and demand has been fueled in large part by the intentional actions of foreign governments, some of whose economies are free market in name only.” MSCI said China’s use of anti-competitive mechanisms to “substantially” increase its steel production over the last several years, despite a drop in consumer demand, is the driving force behind global oversupply. 

To address this global oversupply, MSCI said, “It is imperative … that the U.S. government join with its trading partners and respond to the challenges posed by global excess capacity in the steel sector if the most severe economic impacts to the U.S. economy are to be avoided.” Specifically, MSCI said U.S. policymakers must “consider the impact of U.S. trade policy on downstream U.S. markets and U.S. manufacturers, as well as domestic steel producers.” Increasing the price of imported steel, through tariffs or other means, MSCI argued, would simply raise the input costs of U.S. manufactured steel products. 

Instead, MSCI recommended the U.S. government redouble its efforts to enforce existing trade agreements and laws. As such, MSCI advised USTR to: 1) Engage with U.S. trading partners directly to reduce global excess capacity through negotiation, both bilaterally and multilaterally, and make it a stated principal objective of U.S. trade policy to target excess capacity in countries that increase capacity through market distorting policies; 2) Increase efforts to address currency manipulation, particularly by China; and 3) If the U.S. government imposes additional tariffs on imported steel, to avoid unintended damage to the U.S. manufacturers that utilize steel, it should impose a corresponding and offsetting tariff on steel-containing products identified by USTR in consultation with domestic steel consuming companies. 

Mayors representing steelmakers also weighed in on the matter. For example, Canton, Ohio Mayor Thomas Bernabei discussed the impact global oversupply could have on Timken Steel. Mayor Bernabei noted, “In the last five years, Timken Steel has made more than $500 million in capital improvements to the Stark County area” and that, “without the support of strong trade policies that support our local workers, the City of Canton and surrounding areas will face continued and worsening hardships …” Mayor Bernabei said the Obama administration should “vigorously enforce the current trade laws on the books, and continue to help our steel industry fight against the foreign dumping of cheap steel that is going on every day.” According to Politico’s “Morning Trade,” the local Habitat for Humanity and a local arts council also wrote to the administration in support of Timken. 

All the comments filed in this matter are available for review on Regulations.Gov

The USTR and the Commerce Department have scheduled a hearing on April 12 to hear from the steel industry and other sectors concerned about excess global capacity. MSCI has requested that Richard Robinson of Norfolk Iron and Metal testify on behalf of MSCI. 

As Politico’s “Morning Trade” notes, U.S. steel producers have already filed a number of anti-dumping and countervailing duty cases against China and other suppliers to stem the flow of oversupply and to address unfair trade practices. (Indeed, at the request of AK Steel Corp., Allegheny Ludlum, North American Stainless and Outokumpu Stainless USA, on March 25 the U.S. International Trade Commission approved an investigation that could lead to anti-dumping and countervailing duties on stainless steel sheet and strip from China.) 

Unfortunately, these measures might not be enough. In American Metal Market (subscription required), Steel Dynamics Inc. (SDI) argued the federal government might need to impose temporary Section 201 tariffs in order to protect the U.S. steel industry from overcapacity. In its comments to USTR, SDI said, “The threat posed by overcapacity in China and elsewhere is such that a Section 201 proceeding may be the only viable solution … The unfortunate fact is that while the imposition of anti-dumping and countervailing duties helps, these remedies are insufficient on their own.” 

In other trade enforcement news, Politico’s “Morning Trade” also noted last week that the Commerce Department is moving ahead with an anti-dumping investigation of imports of phosphor copper from South Korea. The U.S. International Trade Commission will make a preliminary injury determination in that case by April 25 and a preliminary AD determination by August.

 

To search, type what you're looking for and results will appear automatically