TPT September 2017

G LOBA L MARKE T P L AC E

G LOBA L MARKE T P L AC E

steel industry as US President Trump puts forth his plans for specialist protectionist measures for the badly weathered US steel industry. This latest push has been based on a Cold War-era trade law that would allow him to restrict imports of any goods or, in this case, commodity, which is deemed to be critical to national defense.” The new administration launched a special investigation into steel imports, and whether the 1962 law conditions were met to justify a limit to imports as a threat to the country’s security. George Lazaridis, Allied’s head of market research and asset valuations, said: “With this backing, it looks as though the Trump administration is now set on course to impose such quotas and tariffs and, to make matters worse, it could in effect cherry pick particular exporters and… freeze any further imports from those locations of origin.” He continued: “As expected, this came under a ‘fire barrage’ at the World Trade Organization… with some of the most prominent countries to be affected, namely China, the European Union, Brazil, Australia, Taiwan and Russia, raising serious concerns. It seems as though we are now in the midst of a potential trade war, as countries take steps to retaliate in the case that the proposed protectionist measure is implemented.” Moves in advance of metals impor t limits US domestic flat rolled steel mills were raising prices in June, as they awaited Department of Commerce Section 232 recommendations on steel. Section 232 of the Trade Expansion Act of 1962 authorises the secretary of commerce to investigate the effects of imports, and how they might affect the overall security of the US. In anticipation of decreased competition from foreign steel, every major US and Canadian flat rolled sheet mill announced $30/ton increases. According to the Steel Market Update index benchmark hot-rolled pricing was approaching $600/ton after declining to an average of $580/ton. Price announcements, and the resulting surge of orders from service centres and end users, brought order lead times up to four weeks, depending on product, producer and location. And extended lead times also reassured North American steel mills. At time of writing there was still no deadline for the Section 232 investigation results, although the Guardian Australia was reporting that Australian steel and aluminium manufacturers will be exempt from any imposed US import tariffs. The G20 Summit concluded on 8 July with some concessions made by members on trade. Pressure from the United States resulted in a G20 joint statement including a more strong- ly worded pledge for members to “fulfil their commitments on enhancing [steel] information sharing and cooperation by August 2017, and to rapidly develop concrete policy solutions that reduce steel excess capacity”.

Steel Net steel expor ts

India’s Economic Times reveals that consumption of carbon steel grew by over 7 per cent in June, compared to the same period last year, but that net steel exports declined to their lowest level in the last 12 months. Overall steel consumption grew by a small margin of 5.3 per cent, year-on-year in June, taking the growth in consumption in the quarter ending 30 June to 4.6 per cent. Major producers benefitted the most as carbon steel production grew by 7.3 per cent in June. Brokerage firm Edelweiss reported that Tata Steel and Rashtriya Ispat Nigam continued to gain market share, compared to the stable production of minor players. “In our view, if domestic demand holds firm, the supply- demand equilibrium in the domestic market is likely to [be sustained] …aided by [a] recent pick-up in [the] Chinese export price,” the report said. Dispute brought to an end After initiating legal proceedings against Essar Steel Minnesota for a claim of over $1bn, citing unmet iron ore supply pacts, ArcelorMittal has agreed to a compromise and the claim lowered to $605mn. The development is significant because Essar Steel Minnesota is reorganising as Mesabi Metallics in a US bankruptcy court, and a deal with ArcelorMittal will avoid an expensive legal battle. DNA Money reports an ArcelorMittal spokesperson, confirm- ing: “ArcelorMittal is pleased to reach an agreement, without litigation, with Mesabi Metallics’ bankruptcy estate on the amount of ArcelorMittal’s allowed claim.” The legal document submitted to the court on 5 July shows the ArcelorMittal claim allowed as a “general unsecured claim in the amount of $605mn”. The agreement also states that the debtors have analysed the underlying contracts and believe that the allowed amount of the ArcelorMittal claim, as fixed by the agreement, is “fair and reasonable”. The US court is expected to ratify the agreement. The claim arose in September 2016, when ArcelorMittal argued that its North American operations were forced to buy expensive iron ore from other producers, despite having a firm ten-year agreement with Essar Steel. Steel trade tension The dry bulk market faces further complications from shifts in steel trade policies. In its weekly report, Allied Shipbroking noted that “trouble seems to be looming once more in the

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SEPTEMBER 2017