The impact of global overcapacity
Unfairly traded imports have a dramatic impact on our ability to command fair prices for our products and operate our facilities at sustainable levels. At the heart of the issue is global excess capacity, driven by government subsidies and other trade distortions.
Global steel production has more than doubled since 2000—growing from 936 million tons in 2000 to two billion tons in 2019. Almost all of it has been attributed to growth outside of the United States, which has seen its share of global production shift from 12% in 2000, to 5% in 2019. While the U.S. has increased production in each of the last three years, global production has increased at a faster rate, leaving the U.S. unable to capture additional share.
Steel production in China exceeded one billion tons for the second consecutive year, increasing by 8% to 1.1 billion tons in 2019. China’s production in 2019 was nearly eight times their production in 2000 (142 million tons). Chinese steel production now represents over half (53%) of global production.
Global steel production: 2000-2019
For ArcelorMittal USA, flat roll import volume deeply impacts the fair competition of our business. A 60% surge in flat roll import volume in 2014 resulted in import share growth from 15.9% in 2013 to 22.8% in 2014, despite available domestic capacity. This flood of imports continued through 2015 at an all-time high of 23.4% market share. There was a slight decrease in import share in 2016 (20.5%) and 2017 (19.9%). Imports of flat roll steel totaled 10 million net tons in 2019, down 21% from 2018. Imports accounted for 15% share of U.S. flat roll consumption in 2019, compared to 18% in 2018. The decline in import share can be attributed to trade cases and Section 232 tariffs on steel imports, which helped slow the flow of cheap steel imports into the U.S. In 2019, import share has now fallen to pre-2014/2015 levels for the first time in six years, while imports are at an eight-year low.
The chart below illustrates that while imports make up a minority share of domestic steel consumption, they remain a disruptive force in the market.
Flat-rolled imports and import share: 2008-2019
Imports capture volume that could be made by domestic steelmakers to improve capacity utilization levels. This disruption is especially true with unfairly traded imports—those sold in the U.S. at dumped or government-subsidized prices. Imports are dumped if, among other criteria, they are sold at prices below their home market prices or the producer’s cost to manufacture. The Section 232 tariffs implemented in March 2018 have helped to slow the flow of cheap imports into the U.S.
Our legal remedy against unfairly traded imports is to file trade cases with the U.S. Department of Commerce (Commerce) and the U.S. International Trade Commission (ITC) against specific countries for specific products. Commerce determines whether imports are being dumped and/or subsidized. The ITC decides if the domestic industry has been injured or is threatened with injury. Indicators of injury include declining U.S. production, shipments, capacity utilization, employment and financial performance. Documentation of lost sales or lost revenue—where we were forced to reduce our prices to compete with import prices—is extremely important in presenting our case. Winning the trade case requires affirmative determinations of injury or threat of injury and either dumping or subsidies. If a given case is successful, Commerce will assess a tariff equal to the difference between the dumped and/or subsidized import price and the fairly-traded price. It is the responsibility of the importer to pay the tariffs; for the products of interest to ArcelorMittal, these duties are as high as 266% of the landed price of the imports. The tariffs remain in effect for five years. At that time, a sunset review is initiated by the ITC and Commerce to determine if the tariffs should be continued or allowed to expire, or “sunset.”
Today, 209 anti-dumping and countervailing duty orders are in place to combat unfairly traded imports of iron and steel products. Despite these orders, the challenge to achieve a sustainable level playing field continues for U.S. manufacturers. To that end, in March 2018 under Section 232 of the Trade Expansion Act, the Trump Administration imposed a 25% tariff on steel imports from many countries and negotiated quota arrangements with others, after concluding that such imports threaten U.S. national security. ArcelorMittal supported this investigation and its goals to improve the competitiveness of the steel industry in the U.S. and to make it increasingly difficult for unfairly traded imports to impact the industry’s ability to respond to the nation’s security interests.
This action by the administration has helped to more positively position ArcelorMittal to compete on that level playing field, strengthening our U.S. business and our investments in our plants and people. We will continue to work with the administration to ensure that this process and other trade actions in place adequately position the American steel industry to meet the country’s national security interests and to address the causes of global excess steel capacity.
