Decline of Russian steel in US negates need for sanctions

Imports of steel from Russia have fallen to negligible levels recently, but imports of aluminium from Russia have not. Government data suggests that US aluminium supply chains rely more heavily on imports in general than the steel industry does due to lower domestic production. That may be why the Biden administration reportedly is considering a ban on Russian aluminium.

Monthly steel imports from Russia fell to under 100 tonnes in July and August – four to five months after the start of the war in Ukraine and roughly the time it would take to ship from there – versus nearly 112,000 tonnes in June 2021 and more than 210,000 tonnes in July 2021, according to US Census Bureau data.

In 2021, Russia was the fifth-largest exporter of steel into the US at 1.47 million tonnes of semi-finished and finished products, representing more than 5% of total US imports, the data showed. Most of that Russian volume, 1.29 million tonnes, was semi-finished material.

By comparison, Canada was the No1 importer at 6.33 million tonnes. Steel imports from Russia totalled 2.87 million tonnes in 2017, the last year before the 25% Section 232 tariffs were implemented on steel and basically double 2021 levels.

The US produced 86 million tonnes of crude steel in 2021, according to the World Steel Association.

Imports of aluminium products totalled nearly 32,000 tonnes in July, up from more than 26,000 tonnes in June and nearly 26,000 tonnes in July 2021, census data showed. In August, imports from Russia totalled more than 15,000 tonnes, down year on year from nearly 32,000 tonnes.

In 2021, Russia was the third-largest exporter of aluminium into the US at nearly 193,000 tonnes, representing more than 4% of total US aluminium imports, according to census data. That is dwarfed by Canada, the largest exporter, at 2.54 million tonnes. That also is down considerably compared to the more than 722,000 tonnes imported from Russia in 2017, the last year before the 10% Section 232 tariffs were implemented on aluminium.

US primary production of aluminium totalled 888,000 tonnes in 2021, according to the US Geological Survey.

The increase in Russian aluminium imports this year is consistent with robust demand growth in the US market, Matt Meenan, vice president of external affairs for The Aluminum Association, told Fastmarkets. He pointed out that import licenses for September and October show a “dramatic” drop in inflows of Russian material. The licenses – which reflect applications to import – totalled 360 tonnes in September and 145 tonnes in October.

Importer struggles

US importers of steel and aluminium from Russia face substantially higher duty rates and shipping problems, according to Steven Baker, customs committee chair of the American Metals Supply Chain Institute.

The high duty rates stem from US President Joe Biden’s suspension of normal trade relations with Russia and Belarus in April, which temporarily moved imports from there to the Column 2 duty rates in the Harmonized Tariff Schedule of the United States (HTSUS), according to Baker. Russia and Belarus were formally moved to Column 2 status as part of a proclamation in June, Baker said. That proclamation increased duties in Column 2 to 35%, including 30 provisions for basic steel mill products, fasteners and other steel items; and six aluminium provisions, he said. Before this proclamation, the only other countries classified as Column 2 were Cuba and North Korea, he noted.

Column 2 rates – excluding those increased to 35% by the proclamation – for basic steel mill products in chapters 72 and 73 of the HTSUS average 20-29%, although certain items have rates as low as 1% and others have rates as high as 45%, according to Baker. Aluminium products in Chapter 76 of Column 2 rates run at 3-45%, he said.

That is on top of Section 232 duties of 25% still in place for most basic steel mill products and duties of 10% on basic aluminium products, Baker added.

Shipping issues are another factor stifling imports from Russia, according to Fastmarkets analyst Paolo Frediani.

“Sanctions targeting the shipping industry and financial institutions make trading difficult, hard to insure and expensive, in addition to carrying some reputational problems,” he said. “That does not mean there are no ways around it if a product can be traded legally.”

The European Union has imported a significant amount of slab from Russia in recent months despite a wide array of EU sanctions against the nation, according to Frediani.

But US steel buyers have no incentive to import from Russia due to:
• The dramatic drop in US steel prices in recent months
• Weakening demand in the US and globally
• Higher duties on Russian slab
• Plenty of alternative sources of supply

Indeed, US steel buyers continue to shun material from overseas in general for most of these reasons. The small amount of steel still coming into the US from Russia in July and August might be explained by Russian producers sending products to their US subsidiaries — items under contract that would have been too costly to change or speciality items, according to Baker.

Several years ago, the US subsidiaries of Russian steelmakers NLMK and Evraz were denied exemptions for Russian slab imports from Section 232 steel duties. Fastmarkets’ fortnightly assessment for steel hot-rolled coil, import, ddp Houston was assessed at $680-700 per short ton ($34-35 per hundredweight) on Wednesday, October 26, down by 5.48% from $700-760 per ton on October 12 and less than half the assessment of $1,480-1,540 per ton a year ago.

Fastmarkets assessed the aluminium P1020A premium, ddp Midwest US at 19.00-20.00 cents per lb on Friday, October 28, flat versus October 25 but 44.89% lower than 34.75-36.00 cents per lb a year ago.

The aluminium market has been very volatile since renewed talk of Russian aluminium exports to the US being banned.