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World steel markets unfazed by Trump's tariff threat

Reuters  |  LONDON 

By Maytaal Angel

LONDON (Reuters) - The of 25 percent U.S. tariffs on imports has raised fears of a global trade war but producers outside believe they can weather the storm without too much disruption to their business or prices.

While the imported 36 million tonnes of in 2017, with Canada, and the leading suppliers, that was less than 8 percent of global market traded volumes of 473 million tonnes during the year.

Also, while tariffs would price some imports out of the U.S. market, analysts at consultants estimate that at most 18 million tonnes would be diverted to other markets - or less than 4 percent of annual traded volumes.

"The volume is relatively small and won't have a big impact on prices," said Roberto Cola, vice of the Council (AISC), which represents steelmakers in

U.S. said last week the would apply 25 percent tariffs on and 10 percent on aluminium to protect domestic producers, prompting major trading partners to threaten retaliation.

"It's not the commodity, it's the act of unilaterally imposing tariffs. Nobody does that. Usually there's a process, there are trade remedies. This is out of the ordinary. It so happened there's a strong lobby in the U.S," said Cola.

Chinese prices, which drive global prices, are still nearly 40 percent higher than when Trump first launched his "Section 232" investigation in April into whether and aluminium imports threatened U.S. national security.

chief commodities economist said global markets and U.S. trading partners were on edge because they feared the new tariffs were the first of many to come, rather than over concerns about the metals sector.

The research house expects to end 2018 at $700 per tonne, up from $476 a tonne before Trump was elected in October 2016, but believes Chinese prices won't be hit because the its exports to the have collapsed.


The said Trump is set to sign a presidential proclamation to establish the tariffs by the end of the week, with a 30-day exemption for and which could be extended.

Despite the decline in Chinese exports in recent years, analysts say Trump's tariffs are first and foremost aimed at

Its industrial expansion created massive overcapacity in the sector and surging exports, which forced some producers to export to markets such as the United States, weighed on global prices, and hurt U.S. steelmakers.

The U.S. has blamed subsidised or unfairly traded industrial goods from for decimating such as and and he ran for election on a ticket of restoring blue collar jobs.

Still, the already has 29 duties in place against Chinese products. Last year, China's exports to the fell to just 1 percent of its total exports, according to calculations.

The Iron and Association, the powerful industry body in a country that produces half the world's steel, said the tariffs would have little impact. only exports 0.1 percent of its overall output to the

By contrast, markets in Europe, a key U.S ally, have more to lose.

According to European association EUROFER, 15 percent of Europe's exports went to the in 2017. The bloc also fears exported to the from other countries could be redirected to after tariffs come in.

Still, analysts say the risks are contained even for as it could be protected from thanks to so-called safeguarding measures is considering.

"The EU has talked publicly of enacting safeguard duties. Safeguards would replicate the protections in the U.S. and lead to a protected EU market above and beyond what we're looking at today," said Jefferies

He said that when former U.S. instituted tariffs on imports in 2002, EU safeguards fully mitigated the risk of redirected imports and supported gradual but robust growth in the EU industry.

A source at a Europe-based producer said while steelmakers might be able to withstand the tariffs, the industry was trying to deter Trump from taking any action that would harm it, hence the strong rhetoric.

told Reuters: "We welcome the announcement of the that appropriate and swift measures will be taken to safeguard our industry."

"The EU must not allow the moderate recovery in our industry to be destroyed by the EU's most important political ally."


The Exporters Association in Turkey, the sixth-biggest exporter to the said it did not expect a significant impact from the U.S. tariffs.

Russia, the fifth-biggest, said it expected some damage from U.S. duties, but said it would hit less than the EU and

Ratings agency said Russian steelmakers' exposure to the was either insignificant in terms of exports, or stemmed from their ownership of production facilities in the country.

For Asian steelmakers, said the tariffs "would be manageable because exports to the U.S. account for relatively small portions of their total production".

It said Korean steelmakers were most exposed, but big firms such as and would weather the storm because their exports were diversified, or because they relied strongly on their domestic market.

ArcelorMittal, the world's biggest steelmaker, said while governments were right to take a tough approach to unfair trade, the only way to create a sustainable industry was for "to work together to address global overcapacity".

Faced with heavy domestic pollution and rising trade tensions, has already cut 115 million tonnes of legal production capacity over the last two years, and another 140 million tonnes of illegal capacity.

The cuts have driven global prices 60 percent higher since late 2015, according to consultants MEPS

The global sector is still straddled with excess capacity in and beyond however, and the U.S. fears could again export its if faced with a downturn at home.

(Additional reporting by in Manila, Christoph Steitz in Frankfurt and Tom Kaeckenhoff in Duesseldorf; editing by David Clarke)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Thu, March 08 2018. 22:02 IST