Strong Domestic steel industry is key to Industrial progress and national security. U.S. steel industry is regarded as cleanest and energy-efficient, having low carbon footprints when compared globally beet peer producers. However, for years domestic steel production in US is falling due to reliance on cheap imports and global oversupply.
Joe Biden has ended economic impasse by announcing the deal to allow entry of certain amount of EU steel and aluminium in United States. The agreement will be melt-and-pour requirement and will prohibit the Chinese steel back door entry into US. By virtue of this melt-and-pour requirement, US will work with the EU for ensuring that Chinese steel doesn’t get transported to US or doesn’t get utilized in manufacturing of European steel products, entering the United States. Details of precise levels of the tariff-rate quota will come out later however the agreement is finalised and EU has also suspended tariff on some of the US product.
Timing of the decision coincides with the timing of G20 leaders in Rome and fears of rising inflation in United states.
During the trump administration, Section 232 of the Trade Expansion Act of 1962 imposed a 25% tariff on steel imports, considering the fact that steel is key to national security and overreliance on steel import poses a significant risk to nation and local industry.
According to estimates of Organisation for Economic Co-operation and Development (OECD), excess capacity which is available globally is 5 times higher to the productive capacity available in United States.
Earlier this year in April, the US Court of International Trade, issued a ruling for overturning a portion of the Section 232 tariffs, imposed on imported products which are derivative of steel and aluminium, but not on the general steel and aluminium tariffs.
According to European steel association (EUROFER), during the second quarter of 2021, domestic consumption in EU recorded exceptional growth in volumes 40 million tonnes (40.5%) including a massive surge in EU steel imports (45%).
Earlier in 2021, provisional anti-dumping duties report published by The European Commission has highlighted that the imported Stainless-Steel Cold-Rolled flat products (SSCR) originating in India and Indonesia were sold at dumped price in EU Market and had taken the steps for curbing unfair imports of SSCR products in the EU market from India and Indonesia by increasing duty.
Those who are looking to bet on Indian Steel stocks have to be conscious of the fact that globally protectionism is rising for steel industry. Domestic production is being encouraged and more and more entry barriers and deterrent are being placed on import through tariff barrier. Us is giving concession to Europe by reducing tariff on few steel products is not alone a commercial decision but also have geo-strategic implications attached to it i.e., a move to keep Chinese steel away from the US Markets, addressing the issue of global oversupply promoting clean energy production for reducing carbon footprints etc. There are no free lunches. Politicians are under increasing pressure to safeguard domestic industry and days of free trades are being replaced by the strategic trade partnership, defined by the alliance of countries sharing same value system and security concern.
Bureau Galactik Views