Trade restrictions help lift steel prices in US
By Adrienne Roberts
Published: June 20 2002 5:00 | Last Updated: June 20 2002 5:00
[A fairly positive article on USA steel tariff by the FT...pb]
Steel prices have risen sharply in the US market as the imposition of trade restrictions in other markets, combined with a real increase in demand, has raised domestic prices in Europe and other markets.
In February President George W Bush ruled that a wide range of imports should face a tariff of 30 per cent. This was followed by threats of similar actions in the European Union and many other countries, fearing a flood of material that would be diverted to their markets by exporters. Export prices from major origins have responded sharply.
Between May and June the European export price of hot rolled coil rose by $70/tonne, "the largest single month's increase in at least the past 20 years and probably of all time", according to a recent report by the Economist Intelligence Unit.
"The evidence so far is that in the short term trade restrictions work - steel prices have risen in all markets without any cut in production," said Matthew Parry, economist at the EIU. "All the benefit goes straight to the bottom line of the steel producers. And they certainly need it."
The EIU argues that trade patterns will adjust to the new price levels. US producers will be able to raise their production, while EU producers will hope to hold a larger share of their regional market at the expense of importers.
With current US prices, low-cost producers in Brazil, Korea, Russia, South Africa, Taiwan and China can pay transport costs and the 30 per cent tariff and still make some contribution to capital charges. The EIU thinks this implies that the level of US imports may remain higher than seemed likely at first.
"The greatest benefit to the US industry may turn out to be in prices rather than in reduced import quantities, while the exporting countries may feel less impact than they feared," says Mr Parry. But the medium and longer-term impact is potentially more serious, in that the competitiveness of alternative materials could be affected.
As far as cost factors are concerned, the scrap price is crucial to the economics of electric steelmaking (33 per cent of world steel production in 2001). In the key US market the scrap price, which had been steady at a rock bottom level, rose slightly in late January and has since been rising sharply.
"The result of these developments is that the larger integrated producers will face rising prices and falling costs and will do significantly better than their smaller, often privately owned electric furnace competitors more dependent on scrap," predicts the EIU. |
