In a letter released Tuesday, the American Iron and Steel Institute (AISI) urged members of the US House of Representatives and US Senate to continue supporting the Section 232 action on steel to preserve the domestic steel industry in the face of the coronavirus shock.
“The American steel industry continues to face extraordinary challenges due to global oversupply driven by foreign government subsidies and other market-distorting policies,” the letter said, noting that the Organization for Economic Cooperation and Development (OECD) estimates that global steel overcapacity increased to almost 500 million net tons in 2019 – five times the total annual US production of steel. The AISI also pointed out that Chinese steel production alone, which represents 53 percent of global steel production, set a record of nearly 1.1 billion net tons in 2019 and increased an additional 7.2 percent on a year-over-year basis in January 2020.
“The coronavirus epidemic is exacerbating the global glut in steel production and threatens to unleash a new surge in imports into the United States, which would be devastating to the American steel industry and our national security,” the letter said. “S&P Global Platts has reported that orders for flat-rolled steel from mills in China are down 50 percent from a year ago, while production remains at or near record levels. As a result, the China Iron and Steel Association reported that inventories of finished steel products in China were 45 percent higher in late February compared to a year ago. If the Section 232 steel tariffs were suddenly removed, as some groups have urged, these inventories of steel products as well as oversupply in many other countries around the world could quickly be shipped to the US market, negatively impacting the domestic steel industry and its workers.”
The AISI also said that while Section 232 tariffs have provided relief by “curbing the import surges that had hit the steel industry prior to 2018,” prices for steel today remain below historical averages. As of January 2020, the inflation-adjusted producer price index for steel mill products was more than 13 percent below its 2004-2020 average.
The AISI said, “the American steel industry recognizes that the coronavirus pandemic presents a very serious threat. Steel producers strongly support policy initiatives to spur domestic economic activity, but the current challenges to the US economy do not justify removal of the President’s Section 232 measures on steel. As the Department of Commerce determined in 2018, steel remains essential to our national security, and the threats of renewed surges in steel imports in the face of the coronavirus shock only make the national security justification for the Section 232 action clearer.”