CSI expects more US Section 232 slab exclusion denials

Requests by California Steel Industries (CSI) to exclude the slabs it imports from Japan, Brazil and Mexico from Section 232 tariffs and quotas have been denied, the company said in a letter to customers dated Tuesday February 26.

The West Coast slab re-roller asked that slabs it buys from mills in Russia and Turkey be exempted from the trade action as well.

Those requests are still pending, “but it appears unlikely that those requests will be granted,” the company said in its letter.

The US Department of Commerce also has denied Russian steelmaker Evraz North America’s request to exempt Russian semi-finished goods. And some market participants told Fastmarkets AMM that those denials did not bode well for other mills seeking slab exemptions.

CSI said it would continue to look to buy more slabs from Brazil, a strategy that worked well for the company in 2018.

“[Brazilian] slabs remain tariff-free, and it is the best-cost option available to us,” CSI said in the letter.

Brazil agreed to a Section 232 quota in order to avoid the 232 tariffs - 25% in the case of steel from most nations and 50% in the case of steel from Turkey.

CSI warned that the Brazilian slab quotas have been quick to fill up, given that other US slab converters also rely on semi-finished goods from the South American nation in order to avoid Section 232 tariffs.

“[But] at this time, we do not anticipate any shortages of slab to fulfill our customers’ orders," the company added.

Brazil is subject to a semi-finished steel quota of approximately 3.51 million tonnes per year, according to US Customs and Border Protection figures.

That quota is divvied up by quarter, and Brazilian steel suppliers and their US customers sometimes rush material into domestic ports in the first month of the quarter to avoid bumping up against quarterly quota ceilings. Slabs that arrive above that threshold are typically stored in warehouses until the next quarterly quota window opens, a practice that incurs additional cost.

Case in point: US buyers imported 833,961 tonnes of slab from Brazil last October, the first month of the fourth quarter 2018. That volume fell by 92.4% to 63,626 tonnes in November, Commerce data shows.

CSI rolls hot-rolled, cold-rolled and galvanized flat-rolled steel from imported slabs.

Fastmarkets’ weekly price assessment of Brazilian slab exports was $490-530 per tonne fob on February 22, up from $460-510 per tonne fob a week earlier.

Fallout from a dam collapse at Brazilian miner Vale could squeeze Brazilian slab supplies, some sources have warned. CSI - a joint venture between Vale and Japanese steelmaker JFE - did not mention that incident in its letter.

Published

February 28, 2019

18:55 GMT

Chicago