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U.S. Steel, CAP Show Steel Tariffs Don’t Always Deliver Their Aims

Canada 418 Materials - Metals/Mining 616 Metals - Steel 428 Mexico 709 Tariffs 1614 U.S. 4478

U.S. Steel is cutting back its production capacity in North America with plans to “begin idling” its iron and steelmaking facilities near Detroit, MI including a closure of its hot strip steel mill by the end of 2020. While pitched as an efficiency-enhancement exercise it is notable that the section 232 tariffs applied by the Trump administration in Mar. 2018 – as well as the wide-range of product-specific tariffs discussed in Panjiva’s Dec. 20 research – have not prevented the closure. 

That may relate to a marked decline in demand for hot-rolled products. Panjiva data shows U.S. imports of hot-rolled steel products fell by 25.8% year over year in the three months to Oct. 31 and by 33.7% in the past 12 months compared to 2016. As a result they reached their higher in total in October since Feb. 2010.

Supplies are currently dominated by exports from Canada, which accounted for 47.6% of the total after climbing 8.6% year over year in the past three months. That was followed by imports from South Korea which represented 10.7% of the total while those from Mexico accounted for 7.6%.

CANADIAN SUPPLIERS RESIST STEEL TARIFFS

Chart segments U.S. hot-rolled steel imports by origin on a monthly and three-month average basis.  Source: Panjiva

One criticism of tariffs is that they’ve simply led to diversions to other markets. That’s certainly applicable in the case of exports from Mexico where U.S.-bound exports fell 9.0% year over year in October after a 22.2% decline in 3Q. 

Meanwhile shipments to the rest of the world – including those shipped within Mexico – climbed 61.3% higher in October after a 26.8% surge in 3Q. As a consequence total Mexican exports climbed by 28.7% in October after rising 9.0% in 3Q.

At the supplier level, the growth in October was led by CAP SA which represented 35.7% of total shipments in the last 12 months after a 49.3% year over year surge in October. That followed by Ternium with more modest 3.6% growth and 18.6% of total shipments. Among second tier exporters, ArcelorMittal had a 4.5% share after returning to the market in 2H 2019.

CAP LEADS MEXICAN HOT-ROLLED STEEL EXPORTS AND GROWTH

Chart segments Mexican hot-rolled steel exports by consignee on a monthly and three-month average basis.  Source: Panjiva

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