Applications for the exemption of European steel products from US tariffs are looking increasingly unlikely to be granted, but some European mills are contemplating exporting to the US as margins can still be made despite a 25% tariff, industry sources said at the S&P Global Platts Steel Markets Europe conference in Barcelona Monday.
Director at trading house Stemcor Dick Sands said US mills are enjoying healthy margins. "There is a $700 margin between scrap and hot-rolled coil in the production process," he said, adding that it is unlikely that US producers would be able to shift capacity up quickly enough.
There are now around 12,000 exemption applications on imports to the US and the theoretical decision period is 90 days. Many subsidiaries of European companies that need specific grades that the US cannot produce applied for an exemption.
"There are way too many for the staff. And I have yet to see one to be excluded," partner at law firm Arent Fox, Matthew Nolan, said.
He also said that companies which produce material in the US and ship it to Europe -- such as Austria's Voestalpine which produces hot-briquetted iron in Texas and ships it to its own steel plants in Austria or other customers worldwide and then produces finished steel to be shipped back into the US -- find themselves now in situations that no longer make sense economically.
"It hurts the US downstream market," vice president at US plate producer Leeco John Purcell said, adding that he believed there would be "some" exemptions.
A source close to SSAB told S&P Global Platts on the sidelines of the conference that plate prices in the US are so high that from a financial point of view it would be beneficial. "It's tricky, especially because we have mills in the US as well. So we don't know," the source said.
Industry group Eurofer's director of trade and external relations, Karl Tachelet, said he did not believe safeguard measures by the EU would lead to a similar pricing effect in the European steel market because the EU was likely to offer exemptions for some products from specific countries.
"US steel prices are significantly above Europe's, but I do not see how a safeguard measure would lead to the same explosion. Prices will remain high, but related to global steel prices," he said.
