The U.S. on Friday moved to impose punitive tariffs on South Korean steelmakers, saying they sold Steel Pipes used in the oil and gas industry at artificially low prices.
The Commerce Department’s final decision on Friday is a win for the U.S. steel industry, especially U.S. Steel Corp. X +3.21% , after one of the most politically charged trade battles in years.
If a special U.S. trade commission finds the alleged dumping hurt American steelmakers, then the tariffs will become permanent and likely buoy steelmaker profit margins in the U.S., while increasing the cost energy companies pay to drill today’s complicated wells.
Steel executives and a union leader have said unfairly priced imported steel could cost U.S. jobs, and numerous U.S. lawmakers have called or written the Commerce Department out of concern about the case.
The Commerce Department assigned tariffs of an extra 15.75% on the tubular steel products from Hyundai Hysco Co. 010520.SE +6.31% and 9.89% for Nexteel Co.; Other Korean suppliers were subjected to punitive tariffs of 12.82%. Those levies aren’t as high as some of the duties the U.S. imposed on China in 2010, but they likely would have an impact on the steel trade.
“We are deeply disappointed by the determination, which disrupts the current level playing field” with high tariffs, said an official at the Korean embassy in Washington. “We had expected the U.S. government to lead by example and resist protectionist pressure. We will consider every possible option to challenge this decision, including at the World Trade Organization.”
Lawyers for some Korean steel companies had said before the decision that they would consider appealing if it went against them. A lawyer for Hysco and Nexteel didn’t immediately respond to a request for comment.
After news of the decision, U.S. steel shares climbed 3.2% in price on Friday to $27.64 by the close.
“We applaud their decision to prevent further gamesmanship of our laws and to secure our nation’s economy,” U.S. Steel Chief Executive Mario Longhi said. “As a result of rising imports, United States Steel has suffered mightily: orders have been reduced, mills have been idled and jobs have been lost.”
The U.S. International Trade Commission will next decide whether the alleged dumping harmed U.S. industry and, if so, make the tariffs permanent. Until then, Korean exporters will have to post cash for the value of the tariffs on shipments to the U.S.
It wasn’t immediately clear whether the tariffs would stop Korean firms from selling the product, known as oil-country tubular goods, or OCTG, in the U.S. market.
A complete shift from Korea to U.S.-produced steel would raise the cost of developing a new well by between 1% and 4%, depending on the quantity and quality of Steel Pipes needed for it, according to estimates from two experts following the case.
Besides Korea, a top exporter of the tubular steel to the U.S., the Commerce Department also found dumping from companies in India, Turkey, Taiwan and other countries. With $818 million of OCTG exports to the U.S. last year, South Korea is by far the largest supplier to the Americans among the countries named on Friday.
Source – wsj