WASHINGTON—Tire manufacturers still are assessing the possible effects of 25 percent tariffs on tire-quality steel wire rod imports to the U.S., but all indications are that the impact could be sweeping.
Intensifying the effect on tire manufacturers and their steel cord suppliers are the antidumping and countervailing duties issued March 26 by the U.S. Department of Commerce.
The Commerce decision levied substantial antidumping and countervailing duties on 10 countries that export carbon and alloy steel wire rod to the U.S., including three that are major exporters of tire-grade steel rod.
Of these three, the duties are as follows:
- Spain: antidumping duties of 32.64 percent against ArcelorMittal Espana S.A., 11.08 percent against Global Steel Wire S.A./CELSA Atlantic S.A./Compania Espanola de Laminacion, and 11.08 against all others;
- South Korea: antidumping duties of 41.1 percent against POSCO and 41.1 percent against all others;
- The United Kingdom: antidumping duties of 147.63 percent against Long Steel U.K. Ltd., 147.63 percent against British Steel Ltd., and 147.63 percent against all others.
Commerce has directed Customs and Border Protection to begin collecting cash deposits from those steel rod importers. This is on top of President Trump's March 8 order establishing the steel tariffs, as well as 10 percent tariffs against most imported aluminum, after a year-long investigation under Section 232 of the Trade Expansion Act of 1962.
This means a massively skewed situation as to the barriers faced by tire-grade steel-importing countries, according to Kimberly Korbel, executive director of the American Wire Producers Association.
"Of the seven major countries that import tire-grade steel, Canada, Brazil and Germany are exempt from Section 232 and do not have antidumping or countervailing duties," Korbel said. "Japan is not exempt from Section 232, but it does not face duties. Spain, (South) Korea and the U.K. are facing both, unless the industry files for exemptions."
Brazil is the biggest exporter of tire-grade steel to the U.S., accounting for 56 percent of the total, the USTMA said.
This is followed by Japan (27 percent), South Korea (8 percent), Spain (4 percent), Germany (2 percent), the U.K. (2 percent) and Canada (0.03 percent), the U.S. Tire Manufacturers Association said.
Tire manufacturers asked about the duties all deferred to the USTMA for comment.
While the USTMA does not have specific information on how the new duties might affect steel wire rod imports, it is closely following the latest announcements from both the Commerce Department and the Office of the U.S. Trade Representative regarding steel tariffs, it said.
"As the country exemption and product exclusion processes are ongoing, USTMA is unable to estimate the magnitude of the effects of these tariffs on domestic tire manufacturing," the association said.
Regarding the tariffs, the USTMA added that the administration granted South Korea an exclusion, but with quotas attached. Canada and Mexico received exclusions very soon after the tariffs were announced, while South Korea was included on a later exclusion list that also included Brazil, the European Union, Australia and Argentina.
"USTMA is cautiously optimistic that these countries will eventually gain permanent exemptions, and USTMA hopes the USTR will determine to also permanently exempt Japan," it said. "However, USTMA remains concerned these countries will have quotas placed on their imports similar to South Korea."
The Section 232 investigation coincided almost exactly with the antidumping and countervailing duty investigations before Commerce and the International Trade Commission. Four U.S. steel manufacturers filed petitions with the ITC March 28, 2017, alleging that they were suffering material injury because of carbon and alloy steel wire rod imports from Belarus, Italy, South Korea, Russia, South Africa, Spain, Turkey, Ukraine, the United Arab Emirates and the United Kingdom.
From the beginning of both investigations, organizations such as the USTMA and the American Wire Producers Association warned that tariffs and duties on imported steel wire rod could have dire consequences for U.S. industry.
Grade 1080 and higher steel wire rod, the quality needed for tire cord, is simply not manufactured in the U.S., the USTMA said multiple times during both investigations.
"Antidumping or countervailing duties on these products would have no impact on the petitioners' performance and sales, while significantly disrupting the production of tires in the U.S.," the USTMA said in a brief to the ITC dated Nov. 27, 2017. The association submitted the brief after an ITC hearing on steel wire rod tariffs.
The domestic tire industry's need for steel is massive and growing, according to the USTMA. In 2016 alone, the industry consumed 429,262 metric tons of tire cord and bead wire, according to a May 31, 2017, submission to Commerce on the Section 232 investigation.
"Tire cord made from high-quality, high-carbon steel is vital to maintaining tire safety and performance," the association said in that document.
Bridgestone Metalpha U.S.A. Inc., the Clarksville, Tenn.-based steel cord manufacturing arm of Bridgestone Americas, expressed the same concerns as the USTMA.
"We are concerned about the breadth of the investigation, as there are no boundaries as to the types of steel that are included in this investigation or in any remedy that may be imposed," Bridgestone Metalpha said in a May 22, 2017, comment to the Commerce Department in response to the Section 232 investigation.
Bridgestone Metalpha is dependent on a few steel wire rod manufacturers in Japan and other countries, of which only one is in the U.S., the company said.
"An action that is taken to prevent harm to the U.S. national security in the steel sector will likely have a significant negative impact on U.S. national security overall," it said.
Representing 87 member companies, the AWPA strongly advocated across the board for an exemption for imported steel wire rod in both the Section 232 and antidumping-countervailing investigations.
AWPA members employ 20,000 workers in more than 200 plants in 35 states and have annual sales of more than $11 billion, the association said in its May 30, 2017, comments on the Section 232 investigation.
Although AWPA members are heavily reliant on domestic steel manufacturers, it also needs access to global sources of steel wire rod, the association said.
"American manufacturers of steel wire and wire products have found that maintaining multiple sources of their key raw material is an indispensable part of their business plans and operations," the association said.
The AWPA devoted a large amount of its May 30 comments to the effects of steel tariffs on the domestic tire cord industry, using Bekaert Corp. as an example.
Bekaert recently spent several million dollars to upgrade its Rome, Ga., plant, and also planned a major expansion to its facility in Rogers, Ark., that supplies steel wire to the tire and reinforced hose markets, according to the AWPA. The Rogers expansion would have increased capacity by 50 percent and added more than 100 jobs, it said.
"But concerns over availability of tire cord wire rod have put those plans on hold," the AWPA said. "Bekaert must obtain this particular wire rod input for its operations from offshore sources because Bekaert has been unable to qualify any U.S. rod mill."
According to the AWPA, tire cord-quality steel rod imports increased notably from Brazil, Japan and Spain between 2014 and 2016, but decreased from the U.K. and Germany.
Brazilian tire-quality steel rod imports rose from 93.9 million kilograms in 2014 to 116.8 million in 2015 and 130.4 million in 2016, the association said.
Japanese imports in the same years went from 77.2 million kilograms in 2014 to 85.5 million in 2015 and 93.4 million in 2016, it said. Spanish imports grew from 7.2 million kilograms in 2014 to 9.7 million in 2015 and 20.9 million in 2016.
Conversely, British imports fell from 24.1 million kilograms in 2014 to 8.3 million in 2015 and 7.2 million in 2016, the AWPA said. German imports went from 3 million kilograms in 2014 to 927,000 in 2015, then rose slightly to 968,000 in 2016, it said.
The Commerce Department published requirements in the Federal Register March 19 for submission for requests from domestic manufacturers for exclusions from steel and aluminum tariffs.
Meanwhile, the Carlstar Group announced price increases of up to 18 percent on all its steel and aluminum wheels and steel components effective April 9.
In announcing the price increases March 27, Carlstar specifically cited the tariffs on imported steel and aluminum as the reason, along with escalating material costs from 2017.