Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

The Specialty Steel Industry of North America (SSINA) represents the interests of the stainless steel and specialty metals businesses in the region. The association is involved with government relations at all levels including trade and environmental.


Laurence Lasoff, Partner at Kelly Drye & Warren LLP and the trade representative for SSINA, discussed the latest issues, tariffs, and legislation affecting the specialty steel industry with Davis Index.


What are some of the issues facing the specialty steel industry today?

Stainless steel and high-performance metals manufacturers face unique issues. Unlike regular steel mills, specialty steel does not have integrated producers. Instead, all producers use electric arc furnaces (EAF) with purchases tied to the scrap side. The products are highly import-sensitive and of substantially higher value per pound compared to regular steel. Members track LME prices given the unique aspect of the surcharges to alloying elements, which can seriously affect their profitability.


Environmental issues are another area where the industry holds high-level dialogue with key stakeholders at the state, regional, and international levels. Environmental influencers can come from the Environmental Protection Agency and internationally, especially, from the European Union. Issues can include intricacies on how metals should be melted, such as in the case of nickel and chromium, to workplace safety, emissions, and waste management.


We also balance the diverse objectives of our members who have varied models for raw materials sourcing, ownership, and strategies. Legislations can affect their business models differently.


What challenges do specialty steel manufacturers face in imports of material?

Imports compared to last year have decreased. The imports of specialty steel quantities fell by 8.7pc to 82,218st on flats in Q1 2020 from the same quarter last year, while longs decreased by 22.5pc to 45,122st during the same period. For specialty steel, aggregated imports declined by 15.9pc in Q1 2020 to 153,379st against the same period in 2019 and Semi-finished fell by 13.2pc to 27,798st during the same period.


However, the ramping up of Chinese stainless-steel capacity is a key area of concern for us as their production of longs is much more than needed for domestic consumption. Moreover, China removed itself from the program under the auspices of the G-7 to manage steel capacity as if its excess capacity issues were solved. As a result, Chinese policies and practices remain a big concern to steel producers. Several years ago, we won an antidumping case against China, which helped address the import penetration in stainless steel flats.


Recently, the Commerce Department initiated a circumvention case on concerns over continued imports especially from Vietnam and Taiwan given their penetration in long products. India has also been a topic of conversation for some time. I remember a 25-year-old trade case against India on stainless steel imports and today the country is on our radar for stainless steel rods and longs.


Moreover, softening import prices and the continued presence of some players despite Section 232 tariffs suggest potential subsidies or unfairly traded practices.


How has Section 232 impacted the industry?

Section 232 has helped in some sectors but not in others. For example, defense is truly a national security sector that directly met the requirements for Section 232. However, for the specialty steel industry—which counts defense as one of its main consumers—trade cases have given better results than the blanket coverage under Section 232.


The specialty metals industry follows the Specialty Metals Amendment closely. The legislation is beyond a Buy America program and has high domestic sourcing requirements for components utilized in products made for the Defense Department.


The specialty steel producers in the US include the larger stainless-steel producers and niche market players in nickel alloys, titanium, and others. During the pre-Section 232 period, higher performance specialty steel was faring better compared to the general steel segment.


The exclusion process under Section 232 is a big issue confronting the specialized metals industry today. The process has placed an inordinate burden of requirements on small companies that seek to defend against exclusion requests. The process is failing them. Exclusions have been granted to some that requested larger amounts then what is relevant to the total market volume. Even after an objection is successful, exclusions can be refiled, or they may be repetitive from various buyers and must be addressed individually. The process requires extensive resources committed to protecting what was gained by the legislation. A lost sale for high value, low volume items can seriously affect a domestic producer’s business.


How is SSINA involved with current legislation for the steel industry?

We cooperate with other industry associations in the pursuit of key legislative initiatives including recently urging the US Congress to include an infrastructure bill in a future stimulus package. We also recently supported the USMCA which included important updates in origin restrictions. 


The association is also a strong advocate for agencies and states to consider lifecycle costing. While stainless steel is more expensive accounting wise to build a bridge, for example, the total cost of using stainless steel in building structures is lower than rebuilding that same infrastructure several times in the same period due to corrosion.


Also, not all inputs for final specialized products are produced domestically. The availability of some inputs due to mining and sourcing are geographically determined. For such materials, tariffs would be inappropriate as we cannot suddenly move to domestic raw material options. As many metals and relevant chemicals are imported from countries such as China and India, we navigate through the varying views to ensure that access to those raw materials is not affected because of trade decisions.

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