US industry unsure of Brazil slab exemption for ‘melt and pour’ requirement for Mexican steel imports

Under a new policy of the US government announced on July 10, Mexican steel imports will face a 25% tariff under Section 232, unless the steel is documented to have been melted and poured in Mexico, the US or Canada.

Mexican president Andres Manuel Lopez Obrador on July 11, however, defended the country’s imports of steel and aluminium from Brazil and stressed that Brazil-origin metal will be exempt from the new “melt and pour” requirements.

“For a very special situation, the steel and aluminum from Brazil is required and we have a very strong relation with Brazil, and it was agreed that Brazil was to have a special treatment in the case of the imports of steel…and aluminum that could have a Brazil component,” Lopez Obrador said during a press conference.

Mexico will require importers of steel products to provide information on the country of origin of steel and aluminium products to enforce compliance, US President Joe Biden and Lopez Obrador reportedly said in a joint statement published on July 10.

Despite the Mexican president’s declaration, market participants in the United States who import steel products from their southern neighbor remained unsure whether Brazil-origin slab and other products would indeed be exempt from the new melt and pour requirements.

“When the announcement first came out, they [Mexican sellers] froze for three to four days last week,” a steel buyer in the US said. “It’s all for the headlines anyway, and they got their headlines.”

 “I have heard that Brazil slab will be exempt, but I have only heard it from Mexico, not from the US government side,” the buyer added. “If Brazil slab is exempt, it will be business as usual.”

US industry sources agree that the target of this new rule is to discourage transshipment of carbon intensive steel from third countries, especially China.

“They were scared for a week, but then they realized that it was Chinese substrate they were going to target, not Mexican,” a steel distributor said.

A second distributor added “the amount of steel that is subject to the tariffs is small, steel substrate from China … so I think overall there will be no impact from this tariff.”

However, the second distributor noted that “Mexico is a dumping ground of steel from all over Asia, and they have a big problem there.”

Fastmarkets’ weekly price assessment for steel slab export, fob main port Brazil was $540-560 per tonne on July 12, widening downward by $10 per tonne from $550-560 on July 5.

The Biden administration has stepped up its rhetoric against China in the 2024 election year, with new tariffs announced in May on goods from China, including steel and aluminium, to counteract China’s “unfair” trading practices. The new tariffs will triple the duties levied under Section 301, with the tariff rate on certain steel and aluminum products increasing from 0-7.5% to 25% in 2024.

The American Iron and Steel Institute (AISI) chief Kevin Dempsey has previously told Fastmarkets the US government should include “melted and poured” requirements for Chinese steel and aluminium imports that will be subject to tripled tariffs under Section 301.

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