US steel capacity just beginning to see effect of tariffs: AISI CEO

  • Wednesday, June 27, 2018
  • Source:ferro-alloys.com

  • Keywords:U.S steel capacity,tariffs
[Fellow]US steel capacity just beginning to see effect of tariffs: AISI CEO

[ferro-alloys.com]It has been three months since the US began implementing a 25% tariff on steel imports under Section 232 of the Trade Expansion Act of 1962, but the US domestic market is only just beginning to see any impact, American Iron and Steel Institute CEO Tom Gibson told S&P Global Platts on Tuesday.

"We're still closer to the beginning of it," Gibson said in an interview on the sidelines of the Steel Success Strategies conference in New York. "We haven't yet seen reflected in the numbers a large change in capacity utilization."

The Trump administration has said its goal with the Section 232 import tariffs, which took effect March 23, is to see US steel industry reach a capacity utilization rate of more than 80%.

The US raw steel weekly capacity utilization rate stood at 75.6% last week, according to AISI data released Monday.

From a demand perspective, the outlook is positive for domestic steel producers, however, imports have continued to enter the US at elevated levels through the first half of 2018, Gibson said.

"Imports were down a little last month, but year-to-date, [finished steel import market share] is at 26%," Gibson said, basing his comments on May import data. "It's less than it was, but it's still at a historically high level of imports."

The AISI holds the view that should any country be granted an exemption to the tariffs, quotas or another means of import control should be enacted, even in the case of Canada and Mexico, Gibson said.

Along with representing the US steel industry, the AISI has member companies in both Canada and Mexico.

"The concern is that any countries that are exempted could become a conduit for the overcapacity and overproduction that still exists and a way for those products to find their way into the US market," Gibson said.

"Obviously the [AISI's] Canadian and Mexican members are in a slightly different position than the domestic members are on that, but I'm hopeful that the North American Free Trade Agreement] negotiations will provide a venue to deal with the issues," he added.

Canada and Mexico received a temporary exemption to the 25% tariff when it took effect March 23, but those exemptions expired June 1.

Retaliatory actions from Canada to the tariffs will take effect July 1, the same date as Mexico's presidential election. Gibson said there will be a settling down period after the election, but he is optimistic that NAFTA renegotiations will pick up again.

"It is vital that the remedy -- which the administration said was either going to be tariffs or quotas -- achieves the goal of restoring the industry to capacity utilization of at least 80%," Gibson said.

To date, the Section 232 actions the US has taken have been successful in incentivizing other countries to look to their own interests with respect to overcapacity, according to Gibson.

"Section 232 is encouraging other countries to look at their own defenses to make sure that if the US isn't going to be the target of the excess capacity that they are not the target either," he said. "That's the whole point. You have to make the countries that have created the overcapacity internalize the cost and do something about it." 

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