US President Donald Trump’s reaffirmation issued Monday that new tariffs would be imposed on $200 billion worth of Chinese imports from next week, though largely expected by observers in China, still triggered concerns among participants in the country’s steel market.
The tariffs starting September 24 will be set at a level of 10% until the end of the year and on January 1, 2019 the tariffs will be raised to 25%. If China takes any retaliatory action, “we will immediately pursue phase three, which is tariffs on approximately $267 billion of additional imports,” Trump said in the Monday statement.
With US tariffs on $50 billion worth Chinese products already in place, the new tariffs combined with the proposed $267 billion worth of products would mean that the US is practically taxing the full value of Chinese exports, one market source concluded.
“Trump’s decision did not surprise me – it was even milder than I thought it would be – but the ever-intensifying trade row between China and US has indeed made me and many insiders worried,” admitted Chang Zhiqiang, a senior official from Taiyuan Iron & Steel Group Co (TISCO), a leading stainless producer based in North China’s Shanxi province. The company hosts 4.5 million tonnes/year of stainless steelmaking capacity.
“Many of our downstream manufacturers sell their end products to US and European markets, and they have already expressed their concerns to me. They hope the Chinese government can introduce measures such as tax refunds or devalue the Renminbi to counter the adverse impacts of the tariffs,” Chang said. TISCO’s downstream partners include major air conditioner maker Haier and microwave oven producer Galanz, which ship large quantities of products to the US every year, Mysteel noted.
“Its impact on the sentiment is already obvious and the influence on our actual demand will also be clearly reflected in our sales volumes, at the earliest from the end of this month,” Chang added.
China is not the only country whose steel market is suffering in the face of US protectionism and steel import safeguard measures subsequently introduced by the European Union. Steel markets in other countries such as Vietnam and South Korea are also impacted, according to a Hongkong-based steel trader.
“Running into steel trade restrictions, exporters in these countries do not know where then can place their products. If US and Europe – both major steel consuming regions – refuse the inflow of products from other countries and use domestically-produced steel products instead, steel demand in the global market will be substantially weakened,” the Hongkong trader commented.
The European Commission introduced provisional quotas for certain steel products imported from other countries as safeguard measures to avert the “high risk of a further increase of imports resulting from trade diversion” from the US after Washington slapped duties of 25% on most imported steel products in March, the European Commission said in a July 17 announcement.
Steel prices in the Vietnamese and South Korean markets have been steadily weak while prices in China and US have picked up over the past few months, according to the Hongkong trader – a comment Mysteel data confirms.
As of September 18, Mysteel’s SD400 16-25mm dia rebar benchmark price among spot-market dealers in Seoul, South Korea, was at the equivalent of $609/tonne EXW, up only $19/tonne from the beginning of July. However, over the same period, Mysteel’s national average HRB 400 20mm dia rebar benchmark price increased by a total of Yuan 476/tonne ($69.3/tonne) to Yuan 4,616/tonne ($673/t), including the 16% VAT.
Written by Olivia Zhang, zhangwd@mysteel.com
Edited by Russ McCulloch, russ.mcculloch@mysteel.com