The U.S. Department of Commerce ("DOC") has made its final decision on anti-dumping investigations on imports of corrosion-resistant steel and concluded that China, India, Italy, South Korea and Taiwan are selling these products in the U.S. market below their fair values and therefore, are subject to anti-dumping duties. The ruling marks yet another major step in stemming the torrent of unfairly-traded foreign imports.
Corrosion-resistant steel is coated with a corrosion or heat-resistant metal such as zinc and aluminum to prevent corrosion, thus extending the service life of the products made from the steel. It is used in making automobiles, trucks, appliances, and industrial and agricultural equipment. The biggest U.S. steel producers, in Jun 2015, filed anti-dumping and countervailing duty petitions with the U.S. International Trade Commission (USITC) and the DOC against five countries accused for illegally dumping cheap corrosion-resistant steel. The petitions, which were filed by six major U.S. steelmakers including Nucor ( NUE Quick Quote NUE - Free Report) , U.S. Steel X, AK Steel AKS, Steel Dynamics STLD and ArcelorMittal USA – a part of ArcelorMittal MT – charge that a deluge of significantly subsidized imports of corrosion-resistant steel from China, India, Italy, South Korea and Taiwan are causing material injury to the U.S. steel industry. The petitions also charge that these producers benefit from a number of countervailable subsidies provided by their respective governments. Imports of corrosion-resistant steel from China, India, Italy, South Korea, and Taiwan were valued at an estimated $500.3 million, $219.6 million, $110 million, $509.1 million, and $534.4 million, respectively, in 2015 (combined value of nearly $1.9 billion). These products are being illegally dumped by foreign steel producers in the American market at unfairly low prices that significantly undercut the prices of U.S. steel makers. The DOC, on Wednesday, imposed a whopping final anti-dumping duty rate of 209.97% on imports of these products from China. This will hurt Chinese exporters including Yieh Phui (China) Technomaterial Co. Ltd and Jiangyin Zongcheng Steel Co. Ltd. India, Taiwan, South Korea, and Italy received anti-dumping duties in the range of 3.05% to 92.12%. The commerce department also issued its final rulings on countervailing duty investigations on imports of corrosion-resistant steel from the five countries. The regulator levied final countervailing duty rate in the band of 39.05% to 241.07% on Chinese imports. With respect to Taiwan, the DOC’s final countervailing duty determinations were negative and hence, no countervailing duties were imposed on imports from that country. The DOC will now instruct U.S. Customs and Border Protection (“CBP”) to start requiring cash deposits based on the final anti-dumping duty rates. The commerce department will also order the CBP to require cash deposits (based on the final countervailing duty rate) in applicable cases should the USITC issues an affirmative injury determination. The USITC is expected to make its final injury rulings on July 8. The latest trade actions came after the DOC’s affirmative final rulings on the cold-rolled steel case, announced last week. The regulator, on May 17, levied a hefty final anti-dumping duty rate of 265.79% on imports of cold-rolled steel from China. The commerce department also levied a massive final countervailing duty rate of 256.44% on Chinese imports. The USITC is expected to make its final injury ruling on cold-rolled steel case on June 30. In Mar 2016, the DOC also imposed preliminary anti-dumping duties on imports of certain hot-rolled steel flat products by seven countries. A final ruling by the DOC on this case is expected in August. China has reportedly criticized Washington's latest trade actions, calling them ‘harmful’. The country’s Ministry of Commerce said yesterday that it will take all necessary actions to gain fair treatment and protect the interests of Chinese steel firms. The U.S. steel producers are still struggling to cope with falling steel prices as a result of the combined impact of imports and overcapacity in the industry. Low costs of production have allowed overseas producers (especially China) to sell their products at cheaper rates, leading to an industry-wide price decline. China, which accounts for around 50% of global steel output, continues to pose a threat to the U.S. steel industry. The Chinese steel industry continues to reel under massive excess steel capacity and sluggish domestic demand amid a cooling economy. China’s economy rose at an annual rate of 6.7% in the first quarter of 2016, its slowest in seven years. Beijing has been repeatedly criticized by the U.S. and the European Union for dumping its excess steel capacity in the overseas markets at unfairly low prices. China's steel exports jumped 7.6% year over year in the first four months of 2016 (per customs data), indicating sustained demand weakness at home. The USITC, yesterday, launched a probe into the allegations contained in U.S. Steel’s complaint against Chinese steel producers. U.S. Steel, in April, lodged a complaint with the USITC, asking the regulator to start an investigation against biggest Chinese steel producers and their distributors. The complaint alleges three clauses of action – illegal conspiracy to fix prices, theft of trade secrets and circumvention of trade duties by false labeling. U.S. Steel is seeking the exclusion of all unfairly traded Chinese steel products from the U.S. market. Steel market conditions in the U.S. have somewhat improved of late, thanks to favorable rulings on steel trade cases in the recent past. Domestic steel makers continue to actively press the U.S. regulators to stop unfair trade practices and enforce new trade laws to rescue the crisis-hit U.S. steel industry. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>