Even when it’s not about China, it’s about China.
China will loom large in a final decision expected Friday from the U.S. Commerce Department on whether to impose tariffs on South Korean steel pipe and tube. U.S. steelmakers said the South Korean products, used in the oil-and-gas industry, are made partly from low-price, subsidized Chinese steel. The U.S. levied duties on China-made tube for the oil and gas industry in 2010.
U.S. Steel Corp. and other American companies said South Korea increasingly is buying inexpensive Chinese steel, processing it and dumping it in the U.S., that is, selling it at artificially low prices. The U.S. companies want authorities to impose tariffs on South Korean steel, similar to the ones imposed on Chinese in 2010 of up to 99% on pipe and tube prices.
“There’s a global overcapacity, of which a third is coming out of China. It’s got to go someplace,” said Debbie Shon, a trade specialist at U.S. Steel.
South Korea responded that it uses mostly domestic sources in tubing for the energy industry and, in fact, is taking advantage of a market opportunity created when the U.S. imposed high duties on Chinese steel. China’s abundant supply also is lowering prices generally, Korea said.
In a February preliminary decision, U.S. trade officials didn’t find that South Korea was dumping tubular steel and didn’t propose imposing duties.
The U.S. has become South Korea’s biggest export market. In the first five months of this year, U.S. imports of South Korean steel increased 74% from a year earlier to 1.1 million tons, according to Global Trade Information Services. Overall U.S. steel imports increased 36% in the same period.
China makes more steel than it needs. Last year it exported 51.7 million tons, up 15% from 2012. South Korea by far is the biggest buyer of Chinese steel. South Korea’s imports of steel from China rose 29% to 5.3 million tons in the first five months of this year.
“There’s a lot of Chinese steel that gets one process done in Korea and then gets shipped to export markets around the world,” said Roger Schagrin, a trade lawyer whose clients include the United Steelworkers union and steelmaker TMK Ipsco, the U.S. unit of Russia’s OAO TMK.
China said it doesn’t subsidize exports and that the U.S. industry is looking for its own government protection. “The U.S. should open the market and not protect some producers that don’t have competitive ability,” said Li Xinchuang president of a government-backed Chinese steel-industry research group.
Korea acknowledged that China’s abundant supply is affecting the market. But Hyundai Hysco Co. 010520.SE +6.58% and Nexteel Co., the two Korean companies targeted by U.S. steelmakers, “sourced virtually all, if not all, hot-rolled inputs from Korea not China,” said Youngjae Kim, an official at the Korean embassy in Washington. Korea said its companies’ prices for tubular steel are low and attractive to U.S. buyers because the industry is highly competitive and hot-rolled steel is abundant. A lawyer for Hysco and Nexteel agreed with the Korean government’s statement.
Korean officials said they would consider all options if the U.S. imposes a significant tariff on Korean steel, including, as a last resort, fighting the decision at the World Trade Organization.
The Korean government “subsidizes everything,” said U.S. Steel Chief Executive Mario Longhi. “First, they get established. They buy the best equipment available, they train their people, they begin to learn more technology, and they begin to undermine their competitors.” He called the February preliminary decision in South Korea’s favor a “major mistake.”
Korea denied subsidizing steel.
Mr. Longhi has made several appearances with United Steelworkers President Leo Gerard.
“The steelworkers and the steel companies fight a lot, but we’re not going to fight over our survival,” Mr. Gerard said. The Commerce Department, he said, should “slap a Chinese duty” on South Korea “for doing the same damn thing the Chinese did.”
U.S. Steel last month said it would idle plants indefinitely in McKeesport, Pa., and Bellville, Texas, starting in August if duties aren’t imposed.
U.S. customers of Korean steel said they are agnostic about where their steel comes from, as long as it is competitive on price and quality.
“Tariffs just mean the U.S. consumer is going to pay more for steel and steel products,” said Chuck Scianna, the president of Sim-Tex LP, a Waller, Texas, steel importer and distributor. “And if it doesn’t come from Korea, we’ll buy it from somewhere else.”
Toby Mack, president of the Energy Equipment and Infrastructure Alliance trade group, said oil and gas drilling contractors naturally are attracted to the lowest-price steel, among other considerations, such as maintaining long-standing relationships with suppliers.
Source – wsj