US and EU Reached Agreement on Steel and Aluminium Tariffs, China’s Steel Prices Will be Little Affected

SHANGHAI, Nov 1 (SMM) - On Saturday (30 October) local time, the United States and the European Union reached an agreement to ease a trade dispute that began under the Trump administration. US Commerce Secretary Raimondo, US Trade Representative Dyche and US National Security Advisor Sullivan announced that the US and the EU have reached an agreement on steel and aluminium tariffs to resolve diplomatic differences that arose during the Trump administration. Under the announced agreement, some EU steel and aluminium products will not be subject to tariffs when imported into the US, but Section 232 tariffs will not be completely eliminated and the EU will lift retaliatory tariff increases on US goods. Raimondo added that the agreement also requires that all steel and aluminium products imported into the US through Europe must be produced entirely in Europe.

Raimondo added that the agreement would ease supply chain pressures, contain cost growth and be beneficial to US manufacturers who use steel and aluminium in their products.

SMM believes that the United States’ agreement to relax tariff restrictions on EU metals, which is conducive to alleviating the contradiction between supply and demand of steel in the United States, will have little impact on Chinese steel prices. Mexico, Canada, South Korea, Germany is the main suppliers of US steel imports. In 2020, US steel imports stood at 22.02 million short tons (1 short ton = 0.907 mt). In 2021, the US steel supply shortage heightened, and the steel prices rose to a historical high level seen in the same period in the US or even the global history. The high prices and lack of supply led to a large increase in US steel imports.

According to the latest data, US steel imports in September this year were 2.94 million mt, up 16.7% MoM and soaring 156.4% YoY. As of the end of October, taking hot rolled coil as an example, the US import prices of CFR stood at $1600-1650/mt, while the European import prices of CFR stood at $1000-1050/mt. Meanwhile, export prices FOB East and Southeast Asia were $800-900/mt, indicating that the current US steel is still much higher than the prices of other international markets. Therefore, the relaxation of some tariff restrictions will be more beneficial to lift the US steel supply, suppressing excessive local price increases. While the relevant rival countries’ steel prices may move up to some extent.

In China, as the domestic crude steel production reduction policy is still in effect, China's steel exports have been significantly reduced after two rounds of export tariff adjustments and industry self-regulation restrictions. And the EU and the United States are not the main countries of China's steel exports. Therefore, the United States’ relaxing tariff restrictions on the EU metal will have little effect on domestic steel prices. However, whether the US will further relax the tariff restrictions on Chinese steel is worthy of attention.