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USITC Finds Injury In Hot-Rolled Steel Case, Affirms Duties

Published 09/13/2016, 10:42 PM
Updated 07/09/2023, 06:31 AM
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The U.S. International Trade Commission (“USITC”) has made its final determinations on anti-dumping and countervailing duty investigations on imports of certain hot-rolled steel flat products by seven countries into the American market. Hot-rolled steel is used in appliances, automotive products, heavy machinery, machine parts, commercial construction and transportation equipment.

The USITC found that imports of these products from Australia, Brazil, Japan, South Korea, the Netherlands and the U.K. as well as imports from Turkey that are sold in the U.S. at less than fair value have caused material injury to the American steel industry. The regulator also affirmed most of the anti-dumping and countervailing duties on imports of these products.

The ruling marks yet another victory for crisis-hit U.S. steel companies in their ongoing battle against unfairly-traded, cheap imports.

The U.S. Department of Commerce ("DOC") earlier determined that these products are being sold in the American market below their fair values and are subsidized by the governments of Brazil, South Korea and Turkey.

The nation’s biggest steel producers, in Aug 2015, filed anti-dumping and countervailing duty petitions with the DOC and the USITC against these seven countries. The petitions, which were filed by six U.S. steel makers including Nucor (NYSE:NUE) , U.S. Steel (NYSE:X) , AK Steel (NYSE:AKS) , Steel Dynamics (NASDAQ:STLD) and ArcelorMittal USA – a part of ArcelorMittal (NYSE:MT) – charge that a torrent of significantly subsidized imports of hot-rolled steel flat products from these nations are causing significant injury to the U.S. steel industry.

Imports of hot-rolled steel from Australia, Brazil, Japan, South Korea, the Netherlands, Turkey and the U.K. were valued at an estimated $122.5 million, $252.6 million, $314.7 million, $649.5 million, $208.4 million, $181.7 million and $197.1 million, respectively, in 2015 (combined value of more than $1.9 billion).

These products are being illegally dumped by foreign steel producers in the American market at unfairly low prices that significantly undercut the prices of U.S. steel makers. These imports have also captured an increasing share of the U.S. market, thereby hurting production, shipments, selling prices and margins of U.S. steel makers.

As a result of the USITC’s affirmative findings, the DOC will now issue countervailing duty orders on imports of hot-rolled steel products from Brazil and South Korea and anti-dumping duty orders on imports from Australia, Brazil, Japan, South Korea, the Netherlands, Turkey and the U.K.

The DOC, last month, slapped a final anti-dumping duty rate of 29.37% on Australian exporters of these products. Brazil’s Usiminas received the highest anti-dumping duty rate of 34.28% while other Brazilian producers were levied final anti-dumping duty of 33.14%. Exporters in the U.K. received anti-dumping duty of 33.06%. Final dumping duties for South Korea and Japan were imposed in the range of 3.89%-9.49% and 4.99% to 7.51%, respectively.

The commerce department also levied final countervailing duty rate in the band of 11.09% to 11.30% on Brazilian producers. In case of South Korea, POSCO and Daewoo International received countervailing duty of 57.04% while other producers were levied a duty of 3.89%.

However, the USITC concluded that imports of hot-rolled steel products from Turkey, which the DOC had determined are subsidized by that country’s government, are negligible. As a result, no countervailing duty order will be issued on imports of these products from Turkey.

The latest ruling comes after the USITC’s affirmative final determination on the cold-rolled steel case, announced earlier this month. The regulator found that imports of cold-rolled steel flat products from Brazil, India, Korea, and the U.K. have caused or threatened to cause material injury to the U.S. steel industry.

U.S. steel companies have been hammered by a tide of cheap imports over the past few years that largely contributed to a slump in steel prices. Low costs of production have allowed overseas producers to sell their products at cheaper rates, leading to an industry-wide price decline.

Nevertheless, steel market conditions in the U.S. have improved of late, driven by favorable developments on steel trade cases in the recent past. Steel prices recovered during the second quarter of 2016, helped by punitive trade actions that led to levy of tariffs on imports. U.S. steel producers continue to actively press the U.S. regulators to stop unfair trade practices and ensure a fairer and more competitive market for American steel makers and workers.

A couple of stocks worth considering in the steel space are ArcelorMittal, sporting a Zacks Rank #1 (Strong Buy) and Ternium S.A. (NYSE:X) , holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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