If anti-dumping lawsuits are filed, what will the impact be on manufacturers and buying organizations?
Why Are Imports Up?
Let’s remember the reason imports began increasing in mid-2014: domestic mills had four-month lead times. Service centers, as well as large manufacturers, had to source imported cold-rolled stainless to stay in business.
A surplus of both domestic and imported cold-rolled stainless has led to low prices.
Manufacturers also relied on imports to make up for the loss of production at Outokumpu’s Calvert, Ala. plant caused by technical issues with its cold-rolling mills. In addition to long lead times, the strengthening US dollar kept imports flowing to the US.
Right now, there is a glut of both domestic and imported cold-rolled stainless steel. Service centers still have higher than desirable inventories.
Base price or Nickel Surcharge?
Is it really the base price that is hurting the domestic stainless mills, or is it the nickel surcharge that has declined by nearly 25% since the beginning of the year devaluing inventories, domestic and import alike?
That question may be tough to answer, so, instead, we’ll look at the likely impact on buying organizations of anti-dumping suits:
- Bright Annealed Coil: Allegheny Ludlum (NYSE:ATI) is the only US producer of 48-inch-wide, bright annealed coil. AK Steel (NYSE:AKS) is the only producer of 36-inch wide. Outokumpu's(HEL:OUT1V) Mexinox facility produces 48-inch wide, but is in Mexico, and could be subject to anti-dumping duties, as it was in 1998. The bright-annealed demand in the US exceeds the domestic supply, making imports a necessity. The bright annealed finish can vary greatly from producer to producer, so once reliable and consistent quality is established, buying organizations will want to stick with that source. Some of the best producers of bright annealed coil are in Taiwan, China and Japan, as well as France and Germany.
- Light Gauge Coil (.030” and thinner): Once the mills get busy again, the light gauges are going to become constrained. The thinner the thickness, the longer it takes to roll on a cold-rolling mill. If anti-dumping lawsuits are filed, then light gauge from domestic mills could become more expensive, thus increasing the cost to the manufacturer.
- Proprietary Stainless Grades: Although the US stainless cold-rolled market is dominated by 304, 316L, 301, 201 and 430, there could be alloys strictly made on an import basis that would be part of anti-dumping cases.
The domestic mills need to look at their strengths and capitalize on them. Anti-dumping lawsuits are a crutch, not a cure, for domestic producers. In the end, stainless coil anti-dumping suits hurt the manufacturer because it limits options and artificially increases prices to source stainless steel coil.
As seen in 2014, imports were a necessity for the US market and have always supplemented it. The domestic mills have already regained short lead times. They are back to delivering many products in under four weeks. The option to import cold-rolled stainless steel needs to be left open in the event that domestic mills cannot fulfill US demand.