Exclusive: U.S. steel industry may challenge Russian trade deal - sources

WASHINGTON/NEW YORK Tue Jun 17, 2014 7:30pm EDT

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WASHINGTON/NEW YORK (Reuters) - The U.S. steel industry is considering challenging a trade deal with Russia that governs imports of hot-rolled steel, potentially reviving a decades-old dispute amid mounting tensions over Russia's actions in Ukraine, two sources said.

A so-called suspension agreement struck after the Cold War has sheltered Russian steelmakers from steep anti-dumping duties on hot-rolled coil, instead setting a cap on HRC imports and a minimum price that many in the U.S. industry believe is too low even after a 2012 revision.

An industry source familiar with the situation said steel companies were looking at urging the U.S. administration to drop or adjust those exemptions.

Imports of hot-rolled, flat-rolled, carbon-quality steel products from Russia rose 162 percent in the three months through April, compared with the previous three-month period.

"Given the volume of imports coming in, the industry is actively exploring its options to terminate or modify the agreement," an attorney familiar with the Russian case said.

"We are in the process of preparing a filing for the U.S. government."

The discussions come at a sensitive time for U.S. relations with Moscow, following Washington's decision to impose travel bans and asset freezes on dozens of Russian officials after Russia seized Crimea from Ukraine.

The move also reflects concerns about weak global prices, oversupply and sluggish demand for hot-rolled steel, which is used in appliances and autos.

Overcapacity has already sparked other trade disputes, including a high-profile U.S. case over imports of steel tubes used by the oil and gas industry.

Even so, the news will likely rattle traders already worried about the impact of escalating tensions over Ukraine on steel trade flows. Russia is one of the biggest foreign suppliers of HRC.

If the deal is revised or canceled, domestic companies such as United States Steel Corp (X.N), Nucor Corp (NUE.N) and possibly also AK Steel (AKS.N) could benefit.

If the agreement dating from 1999 is ditched, Russia's Severstal (CHMF.MM) would be hit with anti-dumping duties of 73.59 percent and other Russian producers, such as Novolipetsk Steel (NLMK.MM) and Magnitogorsk Iron and Steel Works (MAGN.MM), would face duties of 184.56 percent.

The original deal was agreed as the United States moved to stem a flood of Russian steel imports after the Cold War ended.It can be terminated with 60 days notice, or modified by negotiation. Duties would apply immediately upon termination.

While it is unclear if there will be a challenge, the discussions come just two years after the countries renegotiated terms with substantially higher price floors to prevent Russian steel being sold below cost, or dumped, in the U.S. market, an official at the Commerce Department said.

"The Department currently has no plans to further amend or revoke this remedy," the official said.

Under the agreement, reference prices for Russian hot-rolled steel products for the current quarter range from $554.61 per tonne to $709.90 per tonne.

The United States also has suspension agreements in place on imports of Russian uranium and carbon steel plate.

(Additional reporting by Catherine Ngai; Editing by Meredith Mazzilli, Lisa Shumaker and Eric Walsh)

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Comments (7)
Bulgakov wrote:
Any agreement made to help bring Russia into the world market and community of nations should be revoked as soon as possible.

Putin has made of mockery of the attempts by the West to treat him like a rational actor. He has broken countless international laws and treaties. He obviously can’t be trusted and should be treated like a hostile actor.

Jun 17, 2014 7:37pm EDT  --  Report as abuse
Macedonian wrote:
lets do this to all imports

Jun 17, 2014 8:31pm EDT  --  Report as abuse
xcanada2 wrote:
@Bulgakov:

Talk is real cheap.

What real facts do you have?

There is a heck of a big anti-Russia propaganda campaign going on. Your comment just sounds like more of it.

American can’t even compete with the Russian rust belt? That says a lot about where our country is getting to.

Jun 17, 2014 10:01pm EDT  --  Report as abuse
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