US steel sector backs US, EU talks on overcapacity, but wary of impact on trade
US steel groups welcomed an announcement May 17 from US and EU trade officials signaling the beginning of discussions to address global steel and aluminum overcapacity, but they asserted that such talks should not alter any existing trade measures that the US has imposed on the EU to protect the domestic steel industry.
American Iron and Steel Institute CEO Kevin Dempsey said he appreciated the commitment from the US and EU to work together on market distorting concerns, but this cooperation should not necessarily lead to the removal of current US steel trade policy.
“I am hopeful that the US government can work with the EU toward substantive solutions to the global overcapacity crisis in steel while maintaining the necessary trade measures to prevent surges in steel imports that could quickly undermine the US industry and our national security,” Dempsey said in a statement.
USTR, EC team up to tackle steel, aluminum overcapacity, discuss tariffs
United Steelworkers President Tom Conway provided similar commentary, expressing hope that the US and EU can reach a solution to limit damaging global overcapacity without “any approaches that undermine the strength of our industry and the opportunities provided to US workers,” according to a separate statement.
Despite the upcoming discussions between the two governments, Conway said US trade enforcement, such as tariffs against the EU, should remain in place.
“The EU is an important ally, but in the past, it has been part of the problem, not part of the solution,” Conway said. “We have more than 40 unfair trade relief measures in place against EU steel and aluminum products that resulted from their dumping and subsidies targeted at our market.”
The comments from the AISI and USW follow a joint statement from US and EU trade representatives in which they expressed commitment to finding “solutions before the end of the year that will demonstrate how the US and EU can address excess capacity, ensure the long-term viability of our steel and aluminum industries and strengthen our democratic alliance.”
“During a virtual meeting last week, the leaders acknowledged the need for effective solutions that preserve our critical industries, and agreed to chart a path that ends the WTO disputes following the US application of tariffs on imports [of steel and aluminum] from the EU under section 232,” according to the statement.
The joint statement was released by US Trade Representative Katherine Tai, US Secretary of Commerce Gina Raimondo and European Commission Executive Vice President Valdis Dombrovskis.
While the officials pledged to consider appropriate trade measures to preserve their respective metals industries, they “agreed to avoid changes on these issues that negatively affect bilateral trade.”
Talks could pave way for US repeal of tariffs
Industry analysts speculated that the cooperation between the US and EU to address steel and aluminum overcapacity could lead the US to remove its Section 232 steel and aluminum tariffs against the EU.
“We assess there is a strong likelihood that Section 232 tariffs are eventually removed against Europe as the region has historically not dumped steel into the US and removing tariffs should be net positive to manufacturing employment,” UBS analyst Andreas Bokkenheuser said in a report May 17.
Bokkenheuser said an end to the tariffs against the EU could benefit US manufacturers who are currently paying the highest steel price globally and are struggling to remain competitive against imported finished goods.
Any near-term impact from a tariff removal would be limited due to current supply tightness in Europe, he added.
Keybanc analysts said the US-EU discussions come at a time when metal users in both regions are facing margin and demand pressure with steel and aluminum prices reaching record highs.
“Assuming trade barriers on the countries, notably the Section 232 tariffs on carbon steel and aluminum, are dispelled, this could create another viable and more economical supply path for US steel and aluminum consumers and potentially chart a course to displace more of the draconian trade measures in both regions with other trading partners enacted over the last few years,” KeyBanc said in a report.
Aluminum Association welcomes joint US-EU action
Aluminum Association CEO Tom Dobbins said joint discussions on global overcapacity represent an important step towards a better trading relationship between the US and EU.
“It is time for nations committed to a market and rules-based global trading system to come together to combat this shared challenge,” Dobbins said in a statement.
“Any final agreement with Europe should emphasize strong trade enforcement based on a common set of rules. We look forward to supporting this process and are hopeful that the ultimate outcome will address both global aluminum overcapacity and help normalize the US-EU trading relationship.”
The Aluminum Association has repeatedly called for a strong, multilateral effort to address global aluminum excess capacity driven by overproduction in China.
“Massive state subsidies for aluminum production — especially in China — have distorted markets and made it difficult for many aluminum producers to compete on a level playing field for too long,” Dobbins said.