Steelmakers Surge on `Precedent-Setting' U.S. Import Ruling

(Bloomberg) -- U.S. Steel Corp. led gains among major American producers of the metal after the U.S. slapped duties on some Vietnamese alloys made with China imports.

In a preliminary ruling, the Commerce Department found that corrosion-resistant steel and some cold-rolled metal from Vietnam made from products originating in China circumvented duty orders on those imports from China. The decision could pave the way for the U.S. to place duties on other countries that use Chinese steel.

“The argument was always that if you took hot-rolled coil and shipped it somewhere else and turned it into galvanized coil, then they were considered different products, so you can't materially put a duty on that,” Curt Woodworth, an analyst at Credit Suisse Group AG in New York, said in a telephone interview. “The fact that Commerce basically said ‘no, we're kind of throwing material transformation out the window' is pretty important, and opens up the door to other possibilities.”

U.S. Steel gained 5.6 percent to $31.49 at 12:35 p.m. in New York, heading for its biggest gain in a month. Nucor Corp., the biggest American producer, also rose, along with AK Steel Holding Corp. and Steel Dynamics Inc.

Those four companies, along with ArcelorMittal USA and California Steel Industries, petitioned the government on the matter. The U.S. is scheduled to report the final determinations of the case on Feb. 16.

Historical Precedent

“This gives people more hope that by this ruling Commerce has clearly stated that they're supporting steel and they're willing to deviate from the historical precedent,” Woodworth said. “It's pretty precedent-setting.”

Chinese steelmakers fell, with Shanghai-based Baoshan Iron & Steel Co. leading losses on a Bloomberg Intelligence global index of 65 producers.

Imports of the metal from China totaled 52,590 metric tons in October, holding near the lowest level since February 2011, according to U.S. Census Bureau data. The volume of combined steel imports in President Barack Obama's last full year in office in 2016 and Donald Trump's first year in 2017 were on track to be the lowest in a two-year period since 2002-03.

The decline began as the Obama administration passed a slew of import tariffs on steel from China, claiming that overcapacity was allowing the country to dump the metal in the U.S.

To contact the reporter on this story: Joe Deaux in New York at jdeaux@bloomberg.net.

To contact the editors responsible for this story: James Attwood at jattwood3@bloomberg.net, Joe Richter, Steven Frank

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