President Donald Trump's move to investigate whether steel imports are threatening US national security could lead to new US protectionist measures that would have a widespread impact on the Asian steel industry.
Cheap Chinese steel is the main target of Mr Trump's concern. But Thailand, Indonesia and Malaysia all stand to be affected if excess steel from China is dumped in Asean instead of the US. Japanese and South Korean steelmakers are also waiting to see whether Washington will slap higher tariffs on their products.
"Anti-dumping (AD), countervailing duty (CVD) and safeguards are common practices used by the US but the one they normally used in the past was AD," said Vikrom Wacharkrup, chairman of the Iron and Steel Industry Club at the Federation of Thai Industries (FTI).
Governments impose AD duty on imports that they believe are priced below market value, while CVD is levied on imported goods to offset subsidies made to producers in an exporting country. However, "subsidies" are difficult to prove, so countervailing duties are frequently challenged at the World Trade Organization, Mr Vikrom noted.
"The American style, however, is that they will implement these measures first before gaining WTO permission and then it will go through the pleading process once there is a complaint, which could take years before it can be lifted," he told Asia Focus.
The current investigation could give the president broad legal power to block steel products from any country. The Trump administration has invoked Section 232 of the Trade Expansion Act of 1962, which aims to protect US industries that are vital to national security. Imports of cheap steel are said to hurt American workers and federal tax revenues.
Aluminium imports are also being investigated on security grounds because high-purity aluminium is used in defence applications including planes and military vehicles. China has increased its share of the world aluminium market from less than 11% in 2000 to nearly 53% now.
"Steel is critical to both our economy and our military. This is not an area where we can afford to become dependent on foreign countries," Mr Trump said in announcing the inquiry, which must be completed within nine months.
"I believe that Mr Trump will invoke the AD measures because the steel industry is vital for blue-collar workers and they are an important voting base for his administration," said Mr Vikrom.
Tata Steel Thailand (TSTH), a unit of the Indian giant, said global steel supply far exceeds demand and this has become "even more acute" because of the very high volume of Chinese exports.
China last year exported 110 million tonnes of steel -- 40 million tonnes more than the 10 nations in Asean consume, said Rajiv Mangal, the TSTH president and CEO.
"This has resulted in a sharp decline in profitability of steel companies and has resulted in many job losses, and many countries are now in the process of implementing both tariff and non-tariff measures, including the US," he told Asia Focus.
"If fact, if you go back three or four years, the US is one of the most dominant users of all kinds of barriers. As a result in 2015, the US imported 28 million tonnes. In 2016, it imported 22 million tonnes so there was more than a 20% drop in steel imports. So Mr Trump's announcement is not new."
CURRENT DUMPERS
Nevertheless, US Commerce Secretary Wilbur Ross maintains that overall imports of steel by the US have risen 19.6%, with "a very serious impact on the domestic industry".
China makes far more steel than it consumes and has been accused of selling the excess at a lower price than most domestic producers in other countries can charge. Beijing seems to implicitly acknowledge this international complaint as its economic planners have pledged to cut steel capacity by 50 million tonnes this year as part of a plan to reduce output by 100-150 million tonnes by 2020.
The output cuts in fact started in 2016 but operating capacity actually increased by a net 36.5 million tonnes even though government figures showed 85 million tonnes shut down. According to Greenpeace East Asia and the Chinese consultancy Custeel, the plants China says it closed were already idle, some production was restarted elsewhere, while new plants also opened. The industry is plagued by an oversupply from inefficient and high-polluting mills.
China accounts for half the world's steel production and almost a quarter of global steel exports. Its capacity totals 1.1 billion tonnes, accounting for 26% of the US steel market. Second-ranked Japan and sixth-ranked South Korea have also been accused of flooding the world with cheap steel, some of it priced one-third lower than in their home markets.
US steelmakers such as Nucor, US Steel and AK Steel blame big revenue declines on a steel price collapse resulting from the global oversupply, depressed raw material prices and cheap imports from countries including China, Japan and Korea.
US Steel last year launched a petition to outlaw steel imports from China, alleging price-fixing by the China Iron and Steel Association, theft of trade secrets, and evading US duties by shipping the steel via third-party countries including Malaysia, Thailand, Taiwan and Vietnam.
The accusations seem to have some grounds as there was a spike in shipments from these countries after Washington imposed duties on so-called oil country tubular goods (OCTG) from China in 2009. Before 2009, none of these Asian countries shipped more than 5,000 tonnes of OCTG to the US but Taiwan sent 50,000 tonnes in 2010, and Vietnam exported 200,000 tonnes in 2012.
Tata Steel, meanwhile, has blamed the flood of cheap imports for its decision to pull out of Britain while the Australian steelmaker Arrium Ltd has been placed in administration because it could no longer compete.
Seshagiri Rao, joint managing director of JSW Steel of India, told Reuters that Japan and South Korea were exporting steel at prices 35% lower than what they charge at home.
Mr Vikrom, however, believes those two countries could be off the US tariff hook. "They normally export high-end products for US automobile industry assembly lines, such as the factories of Japanese automakers which are creating jobs for Americans, which is probably going to be their argument," he said.
"Trump is targeting China, although he says the steel import probe has nothing to do with China," Choi Moon-sun, a steel analyst at Korea Investment and Securities in Seoul, told Reuters.
"Only about 5% of South Korea's steel production goes to the US, so any impact will be very limited for (the Korean steelmaker) Posco. China will feel the pain if there are any wider import restrictions."
Chinese steelmakers seem undeterred as the US announcement was largely expected. In any case, less than 1% of China's total steel exports went to the US last year.
FUTURE VICTIMS
If the US does increase punitive tariffs on Chinese steel, then some products could find their way to Asean, and the impact would depend on the safeguards or AD duties that each country has in place, Mr Vikrom said.
"What steelmakers here are afraid about is that more excess steel from China could be finding its way here but this also depends on the types of products that could be coming in and the types of products that are being made in the region," he said.
Vietnam, for example, has no tariff on hot-rolled coil (HRC) as it has no local HRC production. It does, however, purchase supplies from abroad for re-rolling and is thus one of the biggest HRC exporters in Asean. The fear is that supplies from China that were destined for America could end up in Vietnam and more cheap HRC could be supplied into the region.
Thai and Indonesian steelmakers, meanwhile, are worried about a possible influx of steel sheet from China, while Malaysia is concerned about steel bar and wire rod. Even though China has significantly reduced steel bar and wire rod output in recent years, dumping of steel sheet is a real possibility that worries all three countries.
Cheap imported steel has already led to high usage of both AD and CVD in the region and fresh tariffs in the US could increase the usage of penalties here. For example, India has set a floor price for imports of steel products to deter exporters from undercutting domestic mills as their imports of steel from Japan and South Korea had jumped by almost half between February and April this year.
Mr Vikrom believes Asean, as a bloc, should continue to negotiate with China to support fairer and freer trade of steel in the region, and that governments should be more involved because, in the long run, nobody will win if current practices continue.
"We need to find a way to lower these AD and CVD levels via dialogue," he said. "For example, Thailand still needs upstream products such as slab, billet and other semi-finished steel products so there should be a dialogue with China [about those products] instead of sending ready-made downstream products.
"This will help with pricing and China's problem of oversupply can be eased this way because Thailand still needs these kinds of upstream products, which means that this is a win-win situation."