No Guarantee of Exception from US Steel Quota
The United States has allowed South Korean steelmakers to apply for an exception from its import quota. This has to do with increasing complaints from American clients, which are now facing higher prices due to higher U.S. trade barriers.
According to industry sourceson August 30, U.S. President Donald Trump said that there may be some exceptions regarding the quota for South Korean, Argentine and Brazilian steelmakers. Previously, they accepted the quota to avoid a 25% tariff. What the U.S. president said means the quota can be exceeded through item-specific exception applications.
The United States’ measures for protecting its own steel industry have led to unexpected problems. With steel supply cut, American automakers’ and electronics manufacturers’ cost burden is rising and their profitability is falling. For example, GM recently adjusted its per-share net profit estimate for this year from US$6.3 to US$6.6 to US$6 due to a rise in local steel price.
Energy companies are in more trouble. With the international oil price on the rise, they were using more and more oil rigs, which means a greater demand for steel pipes. However, steel pipe prices skyrocketed after the import restrictions. For instance, the local price of steel pipes for oil country tubular goods (OCTG) jumped approximately 40% from US$1,047 to US$1,461 per ton between December 2017 and July 2018.
South Korean steelmakers are not that happy in spite of the U.S. President’s change in stance. This is because there is no guarantee that an application will actually lead to an exception. After such applications, the U.S. government talks with local companies, including steel suppliers as well as buyers. The former are likely to be against lower trade barriers. Besides, even if the opposition is overcome, an actual exception is likely to take at least months.