Workarounds already underway in US ferroalloy market for Chinese imports

The workarounds by ferroalloy sellers offering Chinese material and US buyers have already begun. Most expect the 10% duty will be imposed on most if not all the ferroalloys on the USTR’s list in early September.

As a result, suppliers have started to speed up shipments of the Chinese alloys so they will clear customs before any duty is imposed. Since the duty will “only” be 10%, in most cases it can be passed along to buyers, at least they hope so. If not, the two parties might negotiate a compromise. Other alloy sellers are expected to take advantage of the situation by raising their prices, so the playing field might be narrower than anticipated. Also, the Chinese suppliers might be more willing to negotiate a better price to keep a presence in the US market.

Also, wherever a ferroalloy could be substituted for another, i.e., low-carbon ferromanganese for manganese metal, it could be an option. China already dominates the US manganese metal market despite the 14% duty.

Higher alloy prices, however, will put pressure on the US mills to increase their finished product prices, which might be difficult. The mills have been aggressive in raising their prices and this would only add to it. One mill suggested a surcharge for ferroalloys, not just nickel and ferrochrome, on the lines of the recent graphite electrode surcharges from some mills.

What really has buyers and sellers worried is the unpredictability of the Trump Administration. The 10% duty could morph into a 25% duty without much warning. Also, Trump might get pissed at another country and impose duties on that. “Who knows, Trump might impose a 25% duty on Canadian imports of ferroalloys, and that would hurt the silicon metal and specialty ferrosilicon markets,” one analyst suggested. “Likewise, Trump might hit at the EU and impose duties on ferrochrome, manganese alloys, ferrosilicon and silicon metal. Where does it end?

China probably won’t hit back at the US by imposing duties on US imports since it already used most of its ammunition in that area. Instead it will make it difficult for US companies to operate, but not that difficult since it doesn’t want to drive out US investment in China. That would be counterproductive.

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