CRU: Metallurgical Coke Markets Unmoved by Trade War Tariffs

Metallurgical coke has been dragged into the escalating situation by way of both a direct tariff, and consequentially, because of tariffs placed on steel. This Insight explores the reasons why the initial and direct impact on metallurgical coke markets will be minimal, and why countries such as Canada would be ill-advised to introduce retaliatory tariffs on coke.

What started in 2017 as a two-pronged investigation under the guise of protecting US's national security and trade performance has escalated into a fully-fledged global trade war. The original jurisdiction of 232 was the application of tariffs on finished steel and aluminium imports into the USA from numerous countries, including neighbours Canada and Mexico. Section 301 was focused on China, with the USA wanting to end what they deemed to be abusive trading practices with regards to their intellectual property and innovation. However, a back and forth of retaliatory measures has seen duties being recently expanded by the USA to target a wider range of Chinese goods from not only ballpoint pens to live eels, but also to the slightly more topical trade of metallurgical coke.

How section 232 has impacted coke markets
CRU holds the view that steel production in the USA will increase as a result of the 25% tariffs imposed on steel imports under Section 232. This includes the restarting of the two blast furnaces (BFs) at the US Steel Granite City site, which have a combined capacity of 2.2 Mt and were idled in 2015 after global Hot-rolled coil (HRC) prices plummeted to levels below production cost. US Steel also shutdown two coke batteries at Granite City at the time the BFs were closed. Built in the early-1980s, the batteries had a combined capacity of 0.5 Mt/y and exclusively supplied the Granite City BFs. These closures are seen as permanent due to the complexities surrounding the reopening of shut coke ovens. As a result, US Steel will need to source coke from either the domestic or global markets to satisfy their newly increased demand. Considering that, in 2017, the net exports of met. coke for the USA totalled ~1.1 Mt, and domestic producers have been operating below full capacity, there should be ample domestic supply to satisfy the greater requirements associated with the Granite City BFs. This will likely be from either the existing supply agreement from Suncoke's Gateway coke operations, or from any excess capacity at US Steel's own coke ovens at Clairton.

Read the full story: https://www.crugroup.com/knowledge-and-insights/insights/2018/metallurgical-coke-markets-unmoved-by-trade-war-tariffs/ 

Read more about CRU: http://bit.ly/About_CRU 

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CRU offers unrivalled business intelligence on the global metals, mining and fertilizer industries through market analysis, price assessments, consultancy and events.

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