The United States government has been threatening to reduce an existing quota for imports of semi-finished steel products from Brazil in 2020, national steel institute Aço Brasil said on Monday July 27.
US representatives are considering the possibility of blocking the fourth quarter quota for semi-finished steel, which would prevent around 351,000 tonnes of Brazil-origin slab and billet from being exported to the country, according to Aço Brasil’s executive president Marco Polo de Mello Lopes.
The US government is also considering reinstating a 25% tariff on imports of Brazilian semi-finished steel, Lopes said. The measure aims to compensate for the lower use of steel in the US due to the Covid-19 pandemic.
***Producers in the US
“Some steel producers in the US have [a lot of] idle capacity because the market is down, so they want to block our exports in order to sell slab locally,” Lopes said.
Brazilian government officials have been contacted by US Trade Representative Robert Lighthizer and other US authorities with such requests, according to Lopes. Lopes, however, believes it is unlikely that the quota will be cancelled, which would be equivalent to a “breach of contract.”
“[A cut in the existing quota] is not impossible because there is pressure in the US for such a measure, but I believe it is unlikely,” he added.
***Brazil-origin semi-finished imports
Brazil is allowed to ship around 3.50 million tonnes of semi-finished steel to the US each year, a category which includes slab and billet. This follows the northern country’s Section 232 investigation into national security issues on steel imports. Quarterly volumes are not allowed to surpass 30% of the annual limit.
The quarterly limit for Brazil-origin semi-finished imports is usually exhausted on the first day of each quarter, because importers use local free trade zones to store material when it isn’t allowed through customs.
“We have been asked to lighten the use of the quota along each quarter,” Lopes said. “But we can’t decide that, the importers are the ones who chose when the material arrives.”
A quota reduction could negatively affect Brazilian slab prices, since the US is one of the major clients for slab from the country and usually pays higher prices compared to other destinations.
***Brazilian steel exports
Fastmarkets’ weekly price assessment for steel slab, export, fob main port Brazil rose to $380-390 per tonne on Friday July 24, up by $5-10 from the $375-380 per tonne the week before.
Brazil has been relying on the export market to recover steel production volumes, since its manufacturing sector was heavily affected by the Covid-19. It is expected to recover gradually in the coming months.
Brazilian steel exports are expected to fall by 14.4% to 10.96 million tonnes in 2020 from 12.81 million tonnes in 2019, according to a forecast from Aço Brasil on Monday. Export volumes could fall further if the quota is reduced because the estimate includes the maintenance of the status quo.
“Exports are the only solution to the steel sector,” Lopes said.
ArcelorMittal Brasil has recently restarted activities at the No2 blast furnace at its Tubarão slab and hot-rolled coil facility, with the goal of supplying the export market.
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