The U.S. International Trade Commission (ITC) announced Thursday its final determination in favor of the domestic steel industry in the $2.7 billion countervailing (antisubsidy) investigation on Chinese OCTG (oil country tubular goods) with a finding of injury to the domestic industry with a 6-0 vote, showing overwhelming support.
The combined antidumping and antisubsidy tariffs on oil pipe now will range from 10%-99%, meaning these tariffs will be prohibitive to the high-cost Chinese steel-pipe makers. The tariffs in this case are determined in order to offset damage caused by illegal subsidies and dumping.
We view the ITC vote determining injury in the oil pipe case as a positive vote for enforcement of global trade agreements and a strong message to our Chinese trading partners that exports of high-cost steel won't be tolerated.
The pipe case in the U.S. may be the most egregious example of subsidy/dumping by a high cost trading "partner" that we've ever encountered in steel, so this conclusion was unsurprising.
We view this as good news for all global steel stocks, because China's global trading partners are sending a strong message in three separate ways.
First, the U.S//EU/Mexico WTO "resource hoarding" case is addressing China's back-door steelmaker subsidies by placing constraints on the export of steelmaking raw materials.
Second, many of China's Western trading partners have used their own WTO-sanctioned trade laws to limit the entry of high-cost Chinese steel.
Finally, the West has worked with the Chinese steel authority -- CISA -- in order to provide suggestions/guidance for helping rationalize the region's high cost steel industry.
Michelle Galanter Applebaum spent more than 20 years as a managing director at Salomon Brothers in New York and was the No. 1-rated steel analyst from 1988-2003, according to Institutional Investor magazine. In 2003, Ms. Applebaum formed Steel Market Intelligence, a 5-person Chicago-based equity research boutique providing advisory services to institutional investors. In addition to publishing 10-15 reports/week, Ms. Applebaum sponsors numerous CEO-level meetings for her investor clients during the year. She is regularly quoted on Bloomberg, Dow Jones, The New York Times and makes frequent appearances on CNBC and other news programs. Ms. Applebaum lives near Chicago with her husband, visiting children and 2 dogs.