U.S. 25% steel tariff to include Ukraine, exclude EU and others

U.S. President Donald Trump approved on March 22 a 25%
tariff on steel imports to the U.S. The new measures are effective as of March
23. Imports from Argentina, Australia, Brazil, Canada, Mexico, EU member-states
and South Korea are exempt from the tariffs until May 1 pending further
discussions between these countries and the U.S.

Recall, the investigation considered five steel product categories: flat, long, pipe and tube, semi-finished, and
stainless.

Dmytro Khoroshun: The main
Ukrainian victim of these tariffs will be Interpipe (INPIP), which doubled its sales to the U.S. in 2017.
In 2017 Ukraine exported 90 kt of pipes (for USD 76 mln) into the U.S., mostly
Interpipe’s products.

The exclusion of the EU countries is positive for
Metinvest’s rerollers in Italy (Trametal and Ferriera Valsider), Bulgaria
(Promet Steel) and the U.K. (Spartan UK) (that is, at least for a few more
years until Brexit is finalized). If the EU exclusion from these U.S. measures
becomes permanent, it will increase the incentive for Metinvest to acquire a stake in another large EU reroller.

The direct impact on Metinvest’s (METINV) Ukrainian
plants, mostly flat steel producers, will be minimal (in 2017, Ukraine exported
into the U.S. 62 kt of flat products for USD 35 mln). The effect on
ArcelorMittal Kryvyy Rih (KSTL UK), a long steel producer, will be similarly small (2017
Ukraine exports into the U.S. reached 103 kt for USD 55 mln).

Importantly, the investigation did not consider trade
in pig iron, which Ukraine (particularly Metinvest) exports in large quantities
into the U.S. (1.3 mmt for USD 406 mln in 2017).

Last week, Ukraine’s Economy and Trade Ministry
contacted the U.S. government with the goal of excluding Ukraine from the new
steel tariffs. However, regarding Ukraine’s future steel exports into the U.S.,
we see more potential in U.S. consumers of Ukrainian steel products,
particularly of Interpipe’s pipes, applying for exemptions.

Generally, the rise of steel production in the U.S.
due to the tariffs, estimated at 8-13 mmt per year, will have to be absorbed by
steel exporters worldwide, Ukraine included, which will be negative for them.