United States Trade Representative Ron Kirk announced earlier this week that the United States signed agreements with the European Union (EU) and Japan that will bring an end to a 9-year dispute with these trading partners over zeroing. Zeroing is a preferred methodology used to calculate margins in certain types of dumping transactions. According to Tom Danjczek, President of the Steel Manufacturers Association, both the SMA and the Administration were disappointed that according to WTO, alternate methods will now be used to administer results.

According to the USTR’s office, however, these two agreements will head off the risk of the potential for hundreds of millions of dollars of lost exports due to trade retaliation coming from the EU and Japan, resulting in jobs lost for U.S. workers and financial losses for U.S. farms and businesses.

Responses from the steel community were both supportive and cautious.

Leo Gerard, USW International President said, “USW members have been a petitioner or supporter of more than a third of the antidumping cases brought against imports during the last twenty years. Strong trade remedy laws are important for stopping the destructive practices of many of our trading partners who dump products in our market that harm our union members and domestic producers.”

American Iron and Steel Institute (AISI) President and CEO, Thomas Gibson, anticipated the need for either clarification of WTO policies or further agreements with other US trading partners.

“AISI condemns the several rulings by the World Trade Organization (WTO) against zeroing…USTR Ron Kirk has emphasized that the Administration will continue to work to obtain a clarification that the WTO rules permit zeroing, which is critical to making our trade laws work.  We strongly support this position by the Administration, and will continue to work with USTR and the Commerce Department to correct these errant decisions by the WTO.”

Source: United States Trade Representative, United Steelworkers, American Iron & Steel Institute.

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Our Advance/Decliner Index fell back to 64% again this week despite strengthening prices in China after rebounding to 78% from 64% last week. The drop was driven by our Ex-China Index falling from 79% to a nine-week low of 59% as pricing in East Asia and the MENA region weakened.  These regions have been the engine of volatility in our Index over the past three weeks and we suspect that the volatility has been driven by strengthening demand offset by weakening scrap prices.

Our China Index jumped to 86% from zero as spot prices for a number of steel products posted modest gains as business resumed following the Golden Week holidays.

Our full report provides further thoughts about global steel pricing trends and our outlook as well as implications for steel equities.

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According to just-published data from American Metal Market (AMM),  February shredded scrap (obsolete) and #1 busheling (prime) scrap prices fell a greater-than-expected $30 and $45/ton (or 6.4% and 8.7%) to $440/ton and $475/ton, giving back a large chunk of the $60/ton and $70/ton gains seen the over last two months.

The $30 ton decline in shredded most probably is due to reduced overseas demand from Turkey who was largely out of the market in the month – or purchasing from Europe – and several Asian countries who were celebrating the Lunar New Year holidays.  We suspect the much-larger-than-expected $45/ton drop in prime scrap grades is likely the result of at least one major domestic steelmaker making opportunistic foreign purchases of pig iron for February arrival – and thus reducing the mill’s appetite for prime scrap – and  stronger than expected factory activity, which generates more prime scrap.

Globally lowered steel production and milder US weather contributed to weakness in all types of scrap this month, as balmy and dry conditions facilitate increased scrap flows.  February scrap may have been hit with a double-whammy, as forecasters had been calling for a difficult winter, so mills most probably bought more material ahead of time.

Our full report provides our scrap and steel price outlook as well as the implications for steel equities.

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February scrap prices look set to take a worse than expected tumble when final settled prices come out on Monday, as preliminary data on the American Metal Market (AMM) website indicates that shredded scrap (obsolete) and #1 busheling (prime) scrap will decline some $30 and $45/ton (or 6.4% and 8.7%) to $440/ton and $475/ton, giving back a large chunk of the $60/ton and $70/ton gains seen the over last two months.

The $30/ton likely drop in shredded most probably is due to reduced overseas demand from Turkey who was largely out of the market in the month – or purchasing from Europe – and several Asian countries who were celebrating the Lunar New Year holidays.  We suspect the much-larger-than-expected $45/ton drop in prime scrap grades is likely the result of at least one major domestic steelmaker making opportunistic foreign buys for February arrival as well as reduced pig iron prices and  stronger than expected factory activity (which creates prime scrap).

For a free trial subscription contact info@steelmarketintelligence.com.