Steel Market Intelligence

1
Steel Market Intelligence

• Steel Trade Dealing From the Bottom of a
  Stacked Deck

Michelle Applebaum May 19, 2009 847-433-8517 admin
_at_michelleapplebaum.com
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Steel Trade Dealing From the Bottom of a
Stacked Deck
Protectionism and Buy America Search Volume
Indices
Source Google and Steel Market Intelligence
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Steel Trade Dealing From the Bottom of a
Stacked Deck
Trade Restrictiveness Indices by Country,
2005/2006
Note Red bars show tariff and non-tariff
barriers to trade, blue bars show tariffs only.
Source World Bank and Steel Market Intelligence
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Steel Trade Dealing From the Bottom of a
Stacked Deck
Current Account Balances (in Billions), 2004-2008
Source International Monetary Fund and Steel
Market Intelligence
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Steel Trade Dealing From the Bottom of a
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Steel Trade Dealing From the Bottom of a
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Smoot-Hawley Cheap Shot du jour average
tariff levels went from 5 to 20 on some 70 of
imports NOT EVEN CLOSE!
Source Clemens and Williamson (2004), Journal of
Economic Growth and Morgan Stanley
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Steel Trade Dealing From the Bottom of a
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WTO Complaints, 2H 2008 1
WTO Complaints, 2002-2007 1
1 Annualized
Source WTO, Report to the TPRB from the
Director-General, March 26, 2009 and Steel
Market Intelligence
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Steel Trade Dealing From the Bottom of a
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WHY WE NEED BUY AMERICA PART 1. The impact of the
Reagan-era trade suits Imports were running at
a 20 share of the market when the first trade
cases were filed in January 1982. During the
intervening years, imports peaked at 32 of the
market in July 1984, and the VRAs brought
imported steel back to around 20 of the market.
Monthly US Import Market Share, 1981-1986
Source Steel Market Intelligence and SteelFacts
including AISI and US Department of Commerce
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Steel Trade Dealing From the Bottom of a
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WHY WE NEED BUY AMERICA PART 2. Front Running
Why We DO NOT Talk About Trade Cases Chinese
OCTG shipments nearly TRIPLED in the six months
after trade cases became apparent.
Monthly Chinese OCTG Market Share, 2005-Current
Source Steel Market Intelligence, Canadian
International Trade Tribunal, American Metal
Market and SteelFacts including AISI and US
Department of Commerce
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Steel Trade Dealing From the Bottom of a
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Global Differences - Processes for Trade Remedies
Administrative Processes are LESS VISIBLE and
CHEAPER TOO!!!!!

• Europe
• Administrative process provisional duties can be
  imposed 60 days after initiation of a trade
  complaint. Target regions can appeal the
  investigation normally takes less than a year but
  must be completed in 15 months. Provisional
  duties can last 6-9 months.
• US
• Legal process Commerce determines whether or not
  dumping/subsidy has occurred while ITC determines
  injury or threat of injury. Final antidumping
  duties usually take 280-390 days from the date of
  petition while countervailing duties normally
  take 205-270 days.

Source European Commission, Canadian
International Trade Tribunal, US ITC and Steel
Market Intelligence
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Steel Trade Dealing From the Bottom of a
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Steel - New Protective Measures Since September
2008

• China
• Beijing eliminated export duties ranging from
  5-15 on hot-rolled sheet, plate, strip, heavy
  sections, coated wire, some alloy steels and
  welded pipe effective December 1, 2008.
• China increased the export tax rebate to 13 from
  5 for cold-rolled sheet, hot-dipped galvanized
  steel, electrical steels, some alloy steels, and
  high speed bars, rods and wire effective April 1,
  2009.
• India
• On October 31, India withdrew a 15 export tax on
  semi-finished steel.
• In November, the Indian government imposed a 5
  import duty on imports of pig iron, semi-finished
  steel, flat and long products. Steel products
  were also given export incentives of 4-5.
• The government decided to launch an antidumping
  investigation on Chinese imports of hot-rolled
  coil in December.
• India eliminated the 15 export tax on iron ore
  fines in December and reduced the export duty on
  iron ore lump to 5 from 15.
• Introduced licensing requirements for imports of
  certain steel products some requirements were
  removed between December 2008 and January 2009.
• Russia
• In January, the Russian government announced
  plans to raise import tariffs on construction
  steel rod and pipe and tube products.
• In April, the Russian ministry of industry and
  trade extended its antidumping investigation
  until July 21, 2009 for imports of pre-painted
  steel from China, South Korea, Belgium, Finland
  and Kazakhstan.
• European Union
• The European Commission (EC) decided to
  investigate imports of hollow structural sections
  from Turkey in December.
• The EC decided to put dumping duties on imports
  of welded tubes and pipes from Belarus, China,
  Russia, Thailand and Ukraine in late December.
• In January, the Commission decided to impose
  temporary duties on imports of bars and rods,
  hot-rolled, in irregularly wounds coils, of iron,
  non-alloy steel or alloy steel other than
  stainless steel from China and Moldova.
• The EC imposed provisional dumping duties ranging
  from 15-51 on Chinese imports of seamless pipe
  in April.

Source American Metal Market, Steel Business
Briefing, WTO, Report to the TPRB from the
Director-General, March 26, 2009 and Steel
Market Intelligence
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Steel Trade Dealing From the Bottom of a
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Steel - New Protective Measures Since September
2008

• Canada
• In September, the Canadian International Trade
  Tribunal (CITT) issued antidumping and
  countervailing duties against imports of carbon
  steel welded pipe from China.
• In January, the CITT decided to keep antidumping
  duties against plate imports from Bulgaria, the
  Czech Republic and Romania.
• In December, the CITT came to a decision to
  maintain antidumping duties on imports of carbon
  and alloy hollow structural sections from South
  Korea, South Africa and Turkey.
• Brazil
• In February, the Brazilian government launched an
  antidumping investigation into imports of certain
  flat-rolled steel products. The investigation
  will scrutinize imports especially from Asian
  countries.
• Ukraine
• The government eliminated a natural gas surcharge
  used by steel companies on October 1, 2008.
• The ministry of transport froze a tariff for
  cargo transportation for 1H 2009 while prices of
  electricity supplied to mining and steel mills
  are frozen through June 2009.
• Australia
• In December, Australia launched an investigation
  against imports of welded pipe from China.
• Philippines
• The Tariff Commission is investigating a
  safeguard petition that was filed by producers of
  angled bars this month.
• Introduced a new mineral ore export permit for
  the transport/shipment of mineral ores.

Source American Metal Market, Steel Business
Briefing, WTO, Report to the TPRB from the
Director-General, March 26, 2009 and Steel
Market Intelligence
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Steel Trade Dealing From the Bottom of a
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Steel - New Protective Measures Since September
2008

• Vietnam
• Decided to impose a 10 duty on imports of
  boron-added long products in mid April to ensure
  that imports from China do not evade the import
  duty for construction long products which is 15.
  Alloy products quality for a 0 duty in the
  country.
• Increased import tariffs on semi-finished
  products of iron or non-alloy steel.
• Egypt
• In February, the Egyptian government imposed
  temporary import duties on imports of cold-rolled
  sheet, galvanized sheet and plastic-coated sheet.
• Turkey
• In January, the Turkish government increased
  import duties on hot-rolled wide strip and plate,
  cold-rolled plate and sheet, hot and cold-rolled
  strip, tinplate and coated products from 5-7 to
  13-15.
• Indonesia
• The Indonesian Anti-Dumping (AD) Committee opened
  an investigation into alleged dumping of
  hot-rolled plate from Taiwan, China and Malaysia
  in November.
• In April, the AD Committee issued a
  pre-notification to the governments of Korea and
  Malaysia saying that it will initiate an
  investigation into alleged dumping of HRC.
• Introduction of mandatory standards for steel
  products (hot-rolled steel sheets and coils and
  zinc-aluminium alloy coated steel sheets and
  coils).
• Argentina
• Introduced non-automatic import licensing
  requirement, covering steel and metallurgical
  products.
• Malaysia
• Introduced new technical regulations for 57 steel
  products, requiring certificates of approval for
  conformity with Malaysian Standards.

Source American Metal Market, Steel Business
Briefing, WTO, Report to the TPRB from the
Director-General, March 26, 2009 and Steel
Market Intelligence
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Steel Trade Dealing From the Bottom of a
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Steel Trade Dealing from the Bottom of a
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Myths and Realities Currency Trade Bill

• Is foreign currency management a protectionist
  act? The currency reform bill would classify
  foreign currency misalignment as a trade
  subsidy. There is a lot of noise misinformation
  on the currency bill.

• Realities
• Currency management is protectionist. Duties
  would disappear when management does. Free-trade
  restoring.
• Duties neutralize the protectionist subsidy.
• It is not targeted at any country all countries
  level playing field.
• Currently are a half dozen countries who would be
  impacted.
• Foreign countries own our currency for stability
  safety NOT because were nice to them.
• Diplomacy is a great idea but the process has
  been exhausted over many, many years.
• Bill is completely consistent with WTO.
• Holding trading partners accountable to their
  agreements and standing up for our own rights
  should not be a basis for retaliation otherwise
  the concept of rules-based free trade is plowed
  under mercantilism.

• Myths
• Protecting against currency management is
  protectionist.
• Asian countries punished/esp. China.
• Risk of poking finger at our banker.
• Diplomacy works better.
• WTO Consistent?
• Starting a trade war?

Source Coalition for a Prosperous America,
Tradereform.org and Steel Market Intelligence
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Steel Trade Dealing From the Bottom of a
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Source Oanda.com and Steel Market Intelligence
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Steel Trade Dealing From the Bottom of a
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India Accusations of Green
Protectionism NEW DELHI, May 15 (Bernama)
-- India Thursday asked the BRIC members to
unitedly oppose the developed countries' move to
impose environmental taxes on the developing
nations in the name of "green protectionism" to
tackle climate change, the Press Trust of India
(PTI) reported.
Ahead of the first BRIC summit next month in
Russia, Shyam Saran, special envoy to Prime
Minister Manmohan Singh on climate change, warned
that "green should not become a label
'protection' (for the developed nations)". "We
are concerned that green is becoming a new label
for protection. We are now seeing on the grounds
of level-playing field and maintaining
competitiveness, the developing nations will be
forced to take up binding commitment on emissions
reduction or pay tariff," he said.
Source Bloomberg and Steel Market Intelligence
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Steel Trade Dealing From the Bottom of a
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Lobbying Financial Services/Real Estate and
Steel, 1990 and 2008
1990
2008
Source OpenSecrets.org and Steel Market
Intelligence
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Steel Trade Dealing From the Bottom of a
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Op-Eds Buy American Pro vs. Con
Source Steel Market Intelligence
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Steel Trade Dealing From the Bottom of a
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Editorials Buy American Pro vs. Con
Source Steel Market Intelligence
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Steel Trade Dealing From the Bottom of a
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Public Opinion of Trade, 2002 vs. 2007
Note Bars show percentage of respondents
agreeing with the statement that trade is good
for their country.
Source Pew Research Center and Steel Market
Intelligence
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Steel Trade Dealing From the Bottom of a
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US Respondents Agree Free Trade is Good for
our Economy
2002
2007
Source Pew Research Center and Steel Market
Intelligence
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Steel Trade Dealing From the Bottom of a
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EU Countries - Respondents Agree Free Trade is
Good for our Economy
2002
2007
Source Pew Research Center and Steel Market
Intelligence
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Steel Trade Dealing From the Bottom of a
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India - Respondents Agree Free Trade is Good
for our Economy
2002
2007
Source Pew Research Center and Steel Market
Intelligence
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Steel Trade Dealing From the Bottom of a
Stacked Deck
China - Respondents Agree Free Trade is Good
for our Economy
2002
2007
Source Pew Research Center and Steel Market
Intelligence
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Steel Trade Dealing From the Bottom of a
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Joint Effort Eight Global Steel Trade
Associations

• Unprecedented Eight global steel trade
  associations from 3 continents submitted comments
  to the Chinese Steel Authority suggesting
  compliance with WTO agreements as well as
• The Chinese steel industry should be governed by
  market principles
• Chinese steel mercantilist interventions are
  distorting global trade flows based on
  comparative advantage trading principles
• Subsidies create artificial competitiveness
• Raw material export control creates artificial
  cost structure

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Steel Trade Dealing From the Bottom of a
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Chinas Steel Market Distortions China
subsidizes its domestic steel industry causing
excess high-cost capacity that gets exported to
others markets
Chinese Steel Subsidies and Government Support
Practices A Selection
Grants, equity infusions, unpaid dividends and
other preferential access to capital
Access to policy-driven lending at favorable rates
Preferential tax programs

• Transparency on central government programmes
  only, not on local level (tax refunds, tax breaks
  and tax cuts foregoing tax collection worth 7.6
  bn RMB from listed steelmakers)

• 47 companies benefited from preferential lending
  through State Key Technology Renovation Project
  Fund including Anshan, Baosteel and Panzhihua (75
  bn RMB)
• Low cost loans (3.4 bn for major listed steel
  companies such as Baosteel, Wuhan, Anshan and
  Shougang)
• China Development Bank committed to provide
  Anshan with 18 bn RMB loan including 10 bn at
  preferential rates, to promote strategic
  development of the company

• Government infusions (18 bn RMB Maanshan)
• Debt-equity swap (27.5 bn RMB Anshan, Baosteel,
  Lanzhou, Shougang, Taiyuan)
• Government foregoing dividend payment (industry
  profit around 190 bn RMB in 2007)
• In-kind contribution Government provides
  productive assets to another company through
  govenment-mandated merger (51 stake in 3 MT
  Echeng to Wuhan at no cost)

Preferential access to inputs, land and energy

• Free use of land or at less than adequate
  remuneration (Baosteel, Anshang, Xinyu)
• State-owned steel companies provide steel
  substrate (HR) to rerollers at significantly low
  price levels

Source Eurofer and Steel Market Intelligence
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Steel Trade Dealing From the Bottom of a
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China has significant disadvantages in steelmaking

• Plus
• Dynamic domestic demand
• Low labor costs
• Very competitive leaders
• Domestic coal supply

• Minus
• Dependence on iron ore imports
• High energy cost
• Low grade product
• Small producers, non-competitive
• Inland industrial network
• Environmental issues
• Transportation costs
• High capital cost
• Fragmented and inefficient supply chain

Source ArcelorMittal and Steel Market
Intelligence
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Steel Trade Dealing From the Bottom of a
Stacked Deck
Chinas Golden Opportunity

• Beijings Silver Lining
• Opportunity to Restructure Chinese Steel Industry
  
• Currently 50 of Global Capacity but 70 of
  Worlds Growth
• Industry of Two Halves Modern Efficient
  Co-Exists with Backwards and Polluting
• North American Echo North American
  Restructuring Took 20 Years
• Entrenched Stakeholders Unions, Vendors,
  Political Interests Supported High Cost Players
• According to the China Iron Steel Association,
  Chinese steelmakers lost 3.3B Yuan (483M) in 1Q
  2009 and 1.8B Yuan (262M) alone in March. Some
  20 out of 72 (34) large and medium sized
  steelmakers reported losses during the quarter.

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Steel Trade Dealing From the Bottom of a
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Chinese Market Share of U.S. Imports
Source Steel Market Intelligence, Import
Administration and SteelFacts including AISI and
US Department of Commerce.
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Steel Trade Dealing From the Bottom of a
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Chinese Steel Export Surges
EU 27 Imports from China
Source Eurofer and Steel Market Intelligence
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Steel Trade Dealing From the Bottom of a
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Chinese Net Imports Turned into Exports
Chinese Steel Trade Balance, 1994-2012E (Tonnes
in Millions)
of Chinese Consumption
Source World Steel Association and Steel Market
Intelligence
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Chinese steel consumption growth has outpaced
steel capacity growth most of the time
Chinese Steel Consumption vs. Production (Tonnes
in Millions) Assuming Consumption Drops 10
Source World Steel Association, National Bureau
of Statistics of China and Steel Market
Intelligence
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Steel Trade Dealing From the Bottom of a
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The homeless steel in the global market would
have a tsunami effect the impact of a 10
Decline in Chinese Steel Consumption 50MT!!!

• 28 of Asian Market
• 120 of Korean Market
• 71 of Japanese Market
• 26 of International Trade

Source World Steel Association and Steel Market
Intelligence
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Steel Market Intelligence

• Steel Trade Dealing From the Bottom of a
  Stacked Deck

Michelle Applebaum May 19, 2009 847-433-8517 admin
_at_michelleapplebaum.com