The U.S. International Trade Commission (ITC) has unanimously ruled that there is reasonable indication of material injury to the U.S. steel industry as a result of line pipe imports from Korea and Turkey, sold in the U.S. at less than fair value. The ITC will announce preliminary duty determinations around January 9, then announce antidumping determinations around March 25. Some speculate that the fines imposed could be 50% or higher. The rulings could play out in a number of ways:
1. There will be a small penalty in the range of the current OCTG ruling.
With a 5-15% penalty, larger mills will have the capacity to absorb some of the cost of any fines imposed and will pass some of the cost on to customers in the market. Smaller mills with less financial scale to absorb some of the blow will be impacted more negatively by any fines.
2. The ruling could penalize Korean line pipe imports collectively, or could name only individual mills.
If certain mills are singled out, a penalty could take those providers completely out of the competitive landscape, while sending a clear message to other Korean suppliers to be cognizant of their volumes.
3. The penalties could be as steep as some speculate.
A sweeping judgment and penalty above 50% could effectively take Korean line pipe out of the U.S. market.
Collective import levels of Korean line pipe continue to rise. Recent reports put the 2014 YTD import figure at 725K metric tons, a 30% increase over the same period in 2013. There appears to be evidence to support the position that a penalty is warranted.
Be prepared for U.S. prices to increase with the announcement of any judgments and expect there to be a sustained, but not steep, increase. Even if Korea is pulled completely out of the market, which is unlikely, there is enough capacity in the U.S. between facilities on line and announced to keep up with demand and ensure that prices do not spike dramatically.