The threat of a trade war and fluctuating steel demand and production are major talking points in the global steel industry. US tariffs on steel imports and Nippon Steel's pursuit of US Steel highlight shifting dynamics. Meanwhile, the EU struggles with a downturn in the sector, while China undergoes a significant demand shift.
The global steel industry finds itself once again in the spotlight as the threat of a trade war looms. Steel demand and production are fluctuating across the world, and the latest round of proposed tariffs by the US president, targeting 25% on all steel imports, promises a significant recalibration within the industry. This move echoes a similar policy implemented in 2018, when President Trump imposed 25% tariffs on steel and 10% on aluminum, citing national security concerns.
Back then, the Peterson Institute for International Economics criticized the tariffs, pointing out the contradictions in their implementation. While aimed at countering China's influence, they were imposed on NATO allies and other trading partners, despite the US having already significantly reduced imports of steel and aluminum from China through previous antidumping and countervailing duties. The current tariffs are expected to provide short-term benefits to domestic steel producers like US Steel, which produced 15.75 million metric tons in 2023, according to World Steel. However, manufacturers reliant on imported steel may face a more challenging outlook. An intriguing development is that the increased protectionism in the US, driven by these tariffs, might not necessarily translate into a surge in domestic steel production. Nippon Steel, Japan's largest steelmaker and the fourth-largest globally with 43.66 million metric tons produced in 2023, has been actively pursuing the acquisition of US Steel for US$14.9 billion. This deal, initially blocked by former President Joe Biden in January, is still on the table. Japan's Chief Cabinet Secretary Yoshimasa Hayashi stated that Nippon Steel views this as a significant opportunity, venturing beyond a conventional acquisition with a bold proposal. President Trump recently hinted that Nippon Steel is considering a substantial investment in US Steel rather than a direct purchase. This potential investment could bolster US domestic steel capacity, suggesting a less protectionist stance than initially perceived.Meanwhile, the European Union's steel sector continues to grapple with a multi-year downturn. Eurofer, the European steel association, reported a 6% decline in EU steel consumption in 2023, marking the fourth recession in five years. This trend is projected to continue with a further 2.3% decline in 2024 before a modest recovery in 2025. Even with a 2.5% production rebound last year, total output remains below pre-pandemic levels. Capacity utilization in leading European steel-producing nations like Germany, Italy, Spain, and France hovers below 75%. Eurofer raises concerns about the Carbon Border Adjustment Mechanism (CBAM), intended to level the playing field by imposing carbon costs on imported steel. While well-intentioned, Eurofer argues that its improper implementation could jeopardize European competitiveness. They highlight that European steelmakers, already subject to the EU Emissions Trading System (ETS) since 2005, face a unilateral carbon price currently around 75€/t CO₂, while steel imports from third countries lack any such carbon cost. The planned launch of CBAM in 2026 is deemed crucial but also poses significant risks, particularly for a complex industry like steel. ArcelorMittal, Europe's largest steel producer and second-largest globally with 68.52 million metric tons produced in 2023, has recently sold off Kazakh assets and plans to shut down long steel operations in South Africa, citing weak demand and infrastructure challenges. This situation presents a significant challenge for Brussels: to shift economic policy towards a traditional industrial direction with technological support (similar to Trump's approach) or risk becoming complacent, watching production facilities close and relocate to other countries.Shifting to Asia, China, the world's leading steel producer for years, is experiencing a fundamental shift in demand. China Baowu Steel Group, with 130.77 million metric tons produced in 2023, is pivoting towards clean energy and infrastructure projects, moving away from its traditional reliance on property construction. This shift has softened demand for iron ore within China, pushing prices down to around US$100 per ton, a significant drop from recent highs. This transition in China's steel sector adds another layer of complexity to the global steel market dynamics.
STEEL TARIFFS TRADE WAR US ECONOMY EUROPEAN STEEL CHINA STEEL GLOBAL MARKET
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