U.S. Sets New Duties on Chinese Steel as U.S. Steel Posts Loss -- 3rd Update
November 03 2015 - 8:18PM
Dow Jones News
By John W. Miller
The U.S. Department of Commerce slapped preliminary duties on
some steel from China on Tuesday, as U.S. Steel Corp. posted
another quarterly loss and cut its outlook for shipments and prices
amid what it called excessive imports.
Six American steelmakers including U.S. Steel filed three trade
complaints earlier this year. On Tuesday, they received a
preliminary ruling on the first as the Commerce Department
established preliminary duties of up to 236% on imports of
corrosion-resistant steel from China. The tariff goes into effect
immediately and will be set for five years if a final ruling in
favor of the duty is made in January.
Pittsburgh-based U.S. Steel on Tuesday reported a net loss of
$173 million, or $1.18 a share, as total shipments fell 25% from a
year earlier, to 3.9 million tons.
The effect of the sharp drop in volumes was magnified by lower
prices. The benchmark hot-rolled coil price in the U.S. stands at
$393 a ton, down by more than a third from the start of the year,
reflecting pressure on global prices from a flood of Chinese steel
exports. In the first nine months of 2015, China exported 71.4
million tons of steel, up 31% from the same period in 2014, though
U.S. imports from China declined slightly in that time.
U.S. Steel Chief Executive Mario Longhi pointed to the role of
Chinese imports in a company statement Tuesday, saying that
"excessively high levels of imports, much of which we believe are
unfairly traded" hit steel prices.
The company said in July that it expected improved market
conditions in the second half as supply chain inventories
rebalanced, primarily in flat-rolled markets.
The imports, Mr. Longhi said Tuesday, "had a negative impact on
the rebalancing of supply chain inventories, decreasing customer
order rates in the second half of the year." As a result, the
company said it expected significantly lower shipments and average
realized prices than previously projected.
A U.S. Steel spokeswoman said the tariffs were "a good first
step" and that the company is looking forward to the next decision,
"encouraged that our federal agencies tasked with this critical
oversight and enforcement of our trade laws will halt these
harmful, illegal and unfair practices."
China's Commerce Ministry declined immediate comment, saying it
was looking into the decision. Phone calls to the China Iron and
Steel Association weren't answered.
Steelmakers in China and other countries have denied taking
advantage of domestic subsidies or other favors to dump low-cost
steel on U.S. markets.
Overall, imports of steel into the U.S. are slightly down in
2015, but they have increased dramatically for certain key steel
categories, including the corrosion-resistant steel hit by the
preliminary tariff.
Many categories of steel are offered at such low rates that
they're "toxic for pricing," said Phil Gibbs, an analyst for
Cleveland-based Keybanc Capital Markets.
The tariffs will provide some support for prices in the U.S.,
but some analysts say companies are going to have make longer-term
structural changes.
"We could see steel prices stay this low for the next 10 years,"
Mr. Gibbs said.
U.S. Steel has now lost money in eight of the past 10 quarters,
and the company has reported losses totaling $509 million so far
this year. Even the flat-rolled segment, which sells to the booming
automotive industry and is supposed to be one of the company's most
lucrative units, lost money. Its earnings declined to a $18 million
loss from a $347 million profit in the third quarter of 2014.
The Commerce Department also set smaller duties on imports from
India, South Korea and Italy. A separate ruling on the case will be
issued in December.
Rose Yu in Shanghai contributed to this article.
Write to John W. Miller at john.miller@wsj.com
(END) Dow Jones Newswires
November 03, 2015 21:03 ET (02:03 GMT)
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