Beneficiary of Tariffs on Steel
According to industry sources, South Korean steel pipes and tubes accounted for 20% of the United States’ imports of the same products in 2017. Specifically, the United States’ steel pipe and tube imports from South Korea totaled approximately 1.6 million tons and US$1.6 billion based on 8,941 contracts. China, Germany and Mexico followed South Korea with 5,296, 4,087, and 2,500 contracts, respectively.
About 320 American companies imported the products from South Korea last year, and these companies are likely to face an increase in cost once an additional import duty of 25% is imposed on the products on March 23 in accordance with Section 232 of the Trade Expansion Act of 1962. “The American companies will have to pay more to buy the products and South Korean exporters will have to find alternative markets, and then some price distortion may occur,” said an industry insider, adding, “South Korean steel exporters can find an opportunity in Mexico if Mexico, not subject to the tariff, increases its exports to the United States with its output showing no significant increase in the short term.”
According to the World Steel Association, the annual steel consumption of North America is estimated to increase 1.2% from 138.7 million tons to 140.4 million tons between last year and this year and that of Latin America is estimated to increase 4.7% from 40.4 million tons to 42.3 million tons during the same period. Although the United States is planning to increase its self-sufficiency ratio from 73% to 80%, the imports are likely to go up for the time being based on a continuous increase in demand. In other words, the additional import duty is likely to lead to an increase in exports from Mexico to the U.S., and then Mexico is likely to resort to imports from countries like South Korea for its insufficient supply.
In the meantime, Mexico imported approximately 350,000 tons of steel pipes and tubes from all around the world last year, when about 260 Mexican steel importers did business with around 350 non-Mexican steel companies. According to the Korea Iron and Steel Association, South Korea’s steel pipe exports to the U.S. increased from 1.1 million tons to 1.99 million tons between 2015 and 2017, led by the shale gas boom and higher oil prices.