US steel market diverts from global trends

US steel market diverts from global trends

Earlier this week the annual conference of the Latin American Iron and Steel Institute (ILAFA) ended in Caracas, Venezuela. One of the topics discussed was the ever-growing disparity between the US steel market and the global steel market in general. Among the examples given, was the case of hot rolled coils where domestic US prices are at $600 /mt compared with $350 /mt in the Chinese home market or $385 to $400 in Latin America. Chinese mills could easily export these coils to the US at a significantly higher price than they would get at home and still come in considerably under the domestic US price. They would even avoid a dumping charge because they do not sell it cheaper in the US than at home. Another example is the wire rod price. Low carbon wire rod prices in drawing quality from various countries are offered in the US almost $100 /mt cheaper at the port of entry. Even if one considers higher inland freight from the port to the customer than from the mill to the customer, the pricing gap is still significant. Finally, the average unit price for all imported steel products in October 2005 ($731 /mt FOB) is the same as it was twelve months ago in November 2004. Global steel prices underwent their normal gyrations but on the whole declined in no small measure in the last twelve months. There are number of reasons why this is so including: The Chinese may be the largest steel market in the world, but the US market is more consistent in its demand avoiding the wild swings one sees in China. Also, supplies of US domestic steel are a problem at times, particularly on the long product side. More importantly, despite its protestations to the contrary, the US has a lot of antidumping measures in effect and can be considered a fairly protected steel market. The last point brings us to the recent rally Nucor workers organized in Darlington, South Carolina. Lead by Nucor's president and CEO, Dan DeMicco, the usual buzzwords of "fair trade" and "level playing field" were bandied about. That is to say, it was the same crop of trite phrases heard for many years now. Nucor workers should take note of the 182 antidumping measures in effect in the US against foreign steel. Mr. DiMicco, arguably one of the most capable steel executives in the US, neglected to mention this key piece of information. Level playing field? Hardly. More like grossly tilted in favor of the US steel mills.