When investigations collide: Steel 232 and the Russia probe

It’s likely that the U.S. Commerce Department will soon issue its findings from the Section 232 steel investigation. Whenever the report is shared with President Donald Trump, it will be interesting to see how iron and steel imports from Russia — the focus of another investigation you may have heard a thing or two about — are treated.

A lot of Russian steel and steelmaking raw materials come here — more than 2 million metric tons last year. That ranked the country as the seventh-biggest exporter of steel to the U.S. — ahead of China.

{mosads}Consider: Pig iron is a raw material to make steel. In its solid form, it can be re-melted in electric arc furnaces, much like steel scrap. Hardly any merchant pig iron is now made by domestic steel producers. The pig iron that can be made here — in blast furnaces — is generally all consumed by American steelmakers. Effectively, they have none to sell to others.

So, given mini-mill electric furnace needs in particular, there is U.S. demand for pig iron from offshore. Guess where most of it comes from? Russia.

In fact, Russia commanded a whopping 59-percent market share into the U.S. in April, exporting 288,081 metric tons (mt) of pig iron shipments to the U.S., well ahead of Brazil (108,556 mt) and Ukraine (71,321 mt).

Overall, pig iron imports reached an eight-month high in April, as Russia continued to dominate the market. Total U.S. pig iron imports were 489,587 mt in April, according to U.S. Department of Commerce and U.S. International Trade Commission data.

What’s more, since May of last year, Russia has exported an average of about 210,000 mt/month of other steel products to the U.S., for a total of about 2.5 million mt, according to The Steel Import Monitoring and Analysis (SIMA) System. SIMA, in fact, is an enforcement and compliance tool — also under the Department of Commerce.  

U.S. imports of Russian steel peaked in 2014 at nearly 4.3 million mt. That annual surge led to an extension of existing antidumping duties — already in place as a result of trade cases won by domestic steelmakers — on some finished steel, ranging from 74 percent to 185 percent in the case of hot-rolled coil.

But most of Russia’s steel products shipped to the U.S. are semi-finished steel — blooms, billets and slabs. These intermediate products represent the next process stage beyond pig iron, and they serve as feedstock for subsequent rolling into finished products  by steel manufacturers here in the U.S.

Imports of Russian steel mill products have spiked in recent months: 381,032 mt in April; 264,055 mt in March and 187,656 mt in February. May was on track to exceed 400,000 mt.

Commerce’s Section 232 steel investigation findings will indicate whether or not steel imports are a detriment to national security. If so, it can recommend a variety of actions — tariffs, quotas, etc. — which the president can then impose, or not.

But all signals from Trump indicate the hammer is about to drop on unfairly-traded foreign steel — and soon. The president said as much as recently as Monday.

What we don’t know is how sweeping — or selective — any clampdown might be. Some steel products not made here or not critical to national security could well be excluded. Likewise, some countries — like China — might be prime targets, while others are spared.

Add to the mix that on Monday, a group of U.S. line-pipe producers issued a statement saying Russian-owned EVRAZ North America, which produces pipe in Canada “has taken a massive line pipe sale away from the U.S. industry and is aggressively seeking to capture other large sales, even as the administration prepares to issue Section 232 recommendations on whether steel and steel product imports are a threat to national security.”  They urged that Canadian pipe imports be covered by any Section 232 actions.

If the administration does take a hard line on Russian steel imports — in particular on grounds of national security — that could help refute somewhat the broader narrative that the president is a bit too cozy with Russia, or that he’s seemingly aloof about Russian cyberattacks.

But what if Russia and some of its steel product exports to the U.S. are spared? That would present a significant optics problem for the Trump administration. In the glare of the Russian hacking investigation, that could lead to even greater scrutiny.

Note: All steel import data can be found here courtesy of Census.gov.

Joe Innace is the content director of Metals/Americas for S&P Global Platts. He’s also an award-winning business writer, recognized as Steel Journalist of 2015 by the World Steel Association. 

The views expressed by contributors are their own and not the views of The Hill.