Views:1 Author:Site Editor Publish Time: 2021-11-12 Origin:Site
1. Event sorting
On March 1, 2018, Trump, the then President of the United States, implemented the long-abandoned "Article 232" on the grounds of national security, imposing a 25% tariff on imported steel from the European Union and China, and imposing a tariff on imported aluminum. 10% tariff. The EU and other economies will be temporarily exempted until May 1, and whether the extension will be extended will be decided by the United States based on the status of negotiations with each economy. On June 1, the United States formally imposed tariffs on steel and aluminum products imported from the European Union. The European Union implemented countermeasures on the 22nd of the same month, imposing high retaliatory tariffs on some products imported from the United States.
On October 30, 2021, U.S. Secretary of Commerce Raymondo announced that the U.S. and the European Union have reached an agreement on the partial cancellation of import tariffs on steel and aluminum. European steel imports will be partially exempted, provided that the imported steel is entirely produced in the EU, but also said 2018 The steel and aluminum tariffs imposed by Trump in 2016 will continue to be effective for other countries except the European Union.
On October 31, 2021, the Biden administration reached an agreement with EU officials at the G20 summit to cancel some of the tariffs Trump imposed on steel and aluminum three years ago, and reached a "Global Sustainable Steel and Aluminum Agreement" (Global Arrangement on Sustainable Steel and Aluminium), the introduction of a tariff rate quota system will allow a certain amount of steel and aluminum trade between the United States and Europe to maintain a low tariff rate.
In return, the 27 EU countries will abolish additional taxes on American imports, including bourbon whiskey and Harley motorcycles (the import tax rate for these additional products was originally increased by 50% from December 1st).
By comparing 2017-2019 European and American steel and aluminum production and import and export volume (considering the impact of the epidemic in 2020-2021, it is more reasonable to judge with 2019 data), and draw the following conclusions:
Maintaining the interests of the local industrial chain has become the main reason for imposing tariffs on imports. Since the 21st century, the U.S. steel and aluminum production has been in a downward channel. According to data from Mysteel, WSA, and USGS, the U.S. crude steel output in 2017 was 81.61 million tons, a decrease of 19.09 million tons from 2000; aluminum output was 740,000 tons, compared with 2000 A decrease of 2.93 million tons. Under the impact of low-cost primary aluminum in China, Russia and other countries, the first-mover advantage of the U.S. steel and aluminum industry no longer exists. The smelting capacity of some established steel and aluminum companies such as Alcoa and Century Aluminum have begun to gradually shut down or even withdraw permanently. , The gap on the supply side can only be made up by imports. Since 2016, the United States has relied on 64% of imported primary aluminum, and needs to import 25 million tons of steel each year, which has resulted in damage to the interests of domestic steel and aluminum companies and loss of jobs. Some important "ticket warehouse" states in the old industrial areas of the United States, The reaction to this was particularly strong. Superimposed steel and aluminum are widely used in the fields of national defense, military industry, aerospace, etc. They are key materials in some components, and the high degree of external dependence invisibly increases the so-called "national" risk.
It can be seen from the political slogans of the then President Trump that “America First” and “Make the United States Strong Again and Promote the Prosperity of the United States”. One of the most important ruling ideas. Therefore, the main purpose of implementing the steel and aluminum tariff policy on the grounds of "232" is to protect the interests of domestic steel and aluminum companies in the United States and increase related jobs. In fact, it is indeed as Trump wishes. In 2018-2019, the output and related jobs of American steel and aluminum companies increased significantly.
From 2018 to 2019, domestic steel and aluminum companies in the United States significantly increased production and quickly filled the supply gap caused by reduced imports. The net import of steel in the United States in 2019 was 19.98 million tons, a decrease of 5.31 million tons from 2017. The reduction was mainly due to the decline in EU exports, which also means that the United States did not increase imports from other countries. However, the reduction in imports did not lead to a significant gap in the U.S. steel and aluminum supply at that time. Starting in February 2018, domestic steel and aluminum companies in the United States began to significantly increase production, and the supply gap caused by the reduction in imports was quickly filled. When the time comes to 2019, the domestic crude steel production in the United States has increased to 87.8 million tons, an increase of 6.18 million tons compared with 2017, a growth rate of 7.5%; the output of primary aluminum is 1.093 million tons, an increase of 352,000 tons compared with 2017, a growth rate of 47.5% .
The EU has not found new buyers, and exports have fallen sharply. After the United States imposed tariffs on EU imports of steel and aluminum in 2018, EU steel exports to the United States began to decline significantly. In 2019, the EU's steel exports to the United States were 5.68 million tons, a drop of 4.55 million tons from 2017, which was almost cut in half. Since then, the EU has not found a new buyer. In 2019, EU steel exports decreased by 6.17 million tons compared with 2017 (the U.S. crude steel output increased by 6.18 million tons at this stage); the output of primary aluminum in Central and Western Europe in 2019 was 3.45 million tons, compared with 2017. The annual decrease of 327,000 tons (the U.S. primary aluminum output increased by 352,000 tons at this stage) was basically the same as the increase of domestic steel and aluminum in the United States, indicating that the impact was more limited to the European and American sides.
2. After the implementation of tariffs, the European and American hot roll spreads have gradually narrowed
From March to July 2018, the price of steel in the United States experienced a significant increase. Take HRC as an example. At the beginning of 2018, the U.S. HRC CFR price was only $650/ton. On March 1, the U.S. HRC price rose to 755 U.S. dollars/ton. Driven by the news, after the implementation of market transaction tariffs The logic of a gap in US steel supply, the hot coil CFR price on April 8 reached US$953/ton, an increase of 26.2% from March 1. After the formal implementation of additional tariffs on the EU on June 1, the hot coil price in July The CFR price was as high as US$978/ton, a 29.5% increase from before the announcement. The market price gap between the US hot coil CFR and the EU hot coil market reached a maximum of $333/ton in July 2018. However, two months after the implementation of the tariffs, US steel prices showed a trend of decline, and the European and American hot coil spreads gradually narrowed. In October 2019, the hot coil spread between Europe and the United States has shrunk to less than US$100, which proves that even if high tariffs on steel and aluminum are imposed, the actual impact on the United States is actually relatively limited.
3. The specific impact of the U.S. and EU's removal of steel tariffs
High inflationary pressures forced the United States to relax import restrictions. In order to stimulate economic recovery in 2020, major economies around the world have issued large amounts of currency (about 100 trillion yuan), which has spawned a large amount of consumer demand and also caused a sharp increase in the prices of various commodities. The United States, which has already suffered a severely damaged supply chain, coupled with high import tariff policy restrictions, has helped to increase the price of industrial raw materials such as steel and aluminum. / Ton, an increase of 3.35 times over the same period in 2019; LME aluminum prices as high as 2748 US dollars / ton, an increase of 56.2% over the same period in 2019), which greatly increased the inflationary pressure in the United States. In September 2021, the U.S. CPI has grown at a rate of more than 5% year-on-year for five consecutive months, and even the Fed has to publicly stated that if inflationary pressures are too high, it will raise interest rates in mid-2022.
Alleviate the pressure on “carbon peak and carbon neutrality” of the world's largest carbon emitter. Last year, the Biden government rejoined the Paris climate agreement and set ambitious goals: to achieve net zero emissions from the power sector by 2035 and to achieve net zero emissions across the country by 2050. This undoubtedly won more praise for the Biden administration, and to some extent restored the United States' international leadership, while also bringing millions of jobs to the United States (in industries such as new energy). The change in US government policy has also prompted it to appropriately increase imports of primary products in high-energy-consuming industries in order to alleviate the pressure of the world's first carbon emission country to “peak carbon and be carbon neutral”.
Russia gives priority to guaranteeing domestic supply and imposes additional export duties on ferrous and non-ferrous metals. The Russian government will impose tariffs on ferrous and non-ferrous metal exports from August 1 to December 31, 2021, to protect domestic supply. The tariffs will include a basic tax rate of 15% and a specific tax rate. According to Mysteel statistics, Russia is the world's second largest producer of electrolytic aluminum after China, the world's largest exporter of primary aluminum and the fourth largest exporter of aluminum alloy. In 2019, Russia's exports of primary aluminum and aluminum alloys were 1.9 million tons and 840,000 tons, accounting for 17.4% and 6.9% of the total global trade volume, of which primary aluminum exports accounted for 52% of total domestic production. Japan, the United States, and European countries are all major buyers of primary aluminum from Russia. Russia imposes tariffs on aluminum exports, which may lead to tighter supplies in the US primary aluminum market and rising aluminum spot premiums.
After the United States gradually liberalizes some steel and aluminum import tariffs, it will allow the EU to export 3.3 million tons of steel to the United States duty-free each year. After obtaining the approval of the U.S. Department of Commerce, Europe will also be able to increase its annual duty-free quota by one million tons. Theoretically, the tight supply of steel and aluminum in the United States will be effectively alleviated, thereby slowing down the rise in global dollar-denominated commodity prices, and in line with the Biden administration’s ambitious goal of “net zero emissions”.
But the question is, even if the tariffs are partially removed immediately, can the EU really increase exports of millions of tons of steel and hundreds of thousands of tons of primary aluminum to the United States in the short term or next year?
As of the end of October 2021, the price of hot coils in the Midwest of the United States is still as high as US$2085/ton, a year-on-year increase of more than three times, which is enough to show that there is a large supply gap in the US steel; while the market price of hot coils in the EU is US$1190/ton. , Also obviously surpasses other countries such as China, Japan and South Korea. Of course, there are inflation factors, but there are also supply and demand effects. According to data from the World Steel Association, the cumulative global production of crude steel from January to September was 1.44 billion tons, a decrease of 5% compared to the same period in 2019; among them, the crude steel production in the United States was 64.36 million tons, which was a decrease of 1.775 million tons compared with the same period in 2019; the crude steel production in the European Union was 11,484 10,000 tons, a decrease of 4.77 million tons from the same period in 2019 (the EU’s crude steel production in 2019 was 121.2 million tons, a decrease of 47.34 million tons from 2017). From a numerical point of view, the recovery of crude steel in the EU is not even as good as that in the United States, and it has dropped significantly from 2017. As for aluminum, since 2018, the annual output of aluminum in Central and Western Europe has dropped significantly to 3.45 million tons, which is a high energy consumption industry (10.7 tons of carbon emissions per ton of aluminum is 6 times that of steel; electricity consumption per ton of aluminum is 13,500 kWh, which is Electric furnace steelmaking consumes more than 22 times the electricity). Under the current energy crisis and the dual constraints of “carbon neutrality and carbon peaking” in Europe, a substantial increase in production in the short term is impractical, so the EU may find another way.
Since EU crude steel production has not yet recovered to before the epidemic, a large increase in exports will cause its own supply shortage, or there may be an appropriate increase in imports to China and Russia. However, since 2017, China itself has also insisted on reducing production capacity, especially since the next few years will be a critical period for China’s energy and industrial transformation, the pattern of oversupply of steel and aluminum will gradually ease, superimposing the high energy consumption industry "carbon neutrality, carbon neutrality, carbon "Dafeng" is under greater pressure than other industries, so the following will briefly discuss the feasibility of Europe and the United States seeking to increase imports of steel and aluminum from China.
In the short term, China may be able to appropriately increase steel exports while giving priority to domestic supply. Although China currently implements a strict policy of reducing crude steel output, China's cumulative crude steel output from January to September is still as high as 806 million tons, a year-on-year increase of 2%, and the cumulative export of steel products is 53.02 million tons, a year-on-year increase of 31.1%. In order to guide industrial upgrading and transformation and give priority to satisfying domestic supply, the export tax rebate policy for steel products was cancelled in May and August. However, after entering the fourth quarter, it was discovered that domestic demand was declining faster than expected. Many large steel companies reported that the orders received in November were severely insufficient. Some companies’ new orders for cold-rolled steel plates were only 50% of the normal. A better way to stimulate demand; and the EU can export its self-produced steel to the United States to achieve a pattern of multi-party benefits. However, it should be noted that Europe currently has 13% tariffs on imported steel products and 21.2%-31.2% aluminum import anti-dumping duties on China, superimposed on a strict quota system. It is unlikely that China and Europe will greatly increase direct steel and aluminum trade in the short term. Or re-export trade can be realized through Japan, South Korea and Southeast Asia.
In the medium and long term, my country's steel exports will show a decrease in quantity and an increase in quality. The goal of “carbon neutrality and carbon peaking” will be a long-term suppression for my country's energy-intensive industries. Even if exports in 2021 can reach 65-70 million tons, compared with the 2015-2016 peak, my country's exports have actually fallen sharply. In 2022, my country’s steel industry will continue to implement volume reduction development (with a high probability of showing a pattern of double decline in supply and demand), but because next year is a policy year, the phased outbreak of demand may lead to tight supply. Under the temptation of large domestic and foreign price differences, Exports may exceed expectations, so certain policies are needed to regulate them, but an appropriate increase in the export of high-end, high-value-added plates is in line with the development direction of my country's steel industry.
My country's demand for electrolytic aluminum continues to grow, or aluminum imports continue to increase. In 2021, China's electrolytic aluminum production side will be disturbed by factors such as dual control of energy consumption and power shortages, resulting in a relatively tight domestic supply. According to Mysteel data, the actual consumption of electrolytic aluminum in China from January to September 2021 is 30.02 million tons, an increase of 6.08% year-on-year, net imports are 1.247 million tons, an increase of 64.6% year-on-year, and the output is 29 million tons, an increase of 5% year-on-year. The consumption growth rate exceeds supply. With the growth rate, aluminum inventories remained relatively low. In the long run, under the suppression of the "dual-carbon" goal, domestic electrolytic aluminum is difficult to break through the 45 million tons capacity ceiling set during the supply-side reform, and as China's energy-intensive industries shift to overseas, new energy and lightweight demand There is a surge, and import demand is expected to continue to increase.
On the whole, although the short-term impact of the US's partial cancellation of steel and aluminum tariffs on the EU is more limited to the European and American sides, under the background of “carbon neutrality and carbon peaking”, it may have a certain continual impact on global steel and aluminum trade. For my country, a trade route may be added, but policy controls are still needed to prevent Western countries from transferring the pressure of carbon emission reduction to my country.