Section 232 was expected to protect the US steel industry, but we are still hearing about idling furnaces, slashing workforce and cutting prices. Is Mr Trump plan for the steel industry is really working?
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Donald Trump imposed import tariffs of 25% on steel and 10% aluminium under section 232 in March 2018. The action was based on the argument that the US has been suffering from unfair trade. He included Canada and Mexico in the countries under sanctions, despite the North American Free Trade Agreement (NAFTA). However, they have been expected later with a few more countries.
Among other markets, the duties have so far distorted the steel market including semi-finished and finished steel markets and caused the prices reached the zenith. The affected countries retaliated and took similar actions against the US. Some countries also took additional measures to block the diverted steel from the US and a domino effect was kicked off. We saw a lot of announcements from steel producers about their new investment projects.
Currently, in the US, prices reached rock bottom, demand is weak, production capacities slashed, and new projects delayed. The overall US steel industry remained quite depressed due to a lack of demand, with major downstream steel-consuming sectors – including the automotive, agriculture and energy segments – showing increased weakness. Buyers are reluctant to take positions. Lead times have reduced to as little as one to two weeks at certain mills. Scrap prices also continued its slump, which compensated producers with fall in their finished steel prices.