Impact of US Import Tariff on Iranian Steel Industry

US President Donald Trump imposed heavy tariffs on imported steel and aluminum. Trump signed two proclamations that levied a 25 per cent tariff on steel and a 10 per cent tariff on aluminum imported from all countries except Canada and Mexico. The contentious tariffs will go into effect in 15 days. Other countries would have to negotiate with US Trade Representatives (USTR) if they want exemptions from the steel and aluminum import tariffs.

As per US President "It was necessary to boost the US industry suffering from "unfair" business practices, a move that has sparked fears of a global trade war."

While it's the hot topic of each and every economic session, Section 232 tariffs on imported steel to the US could interpret into an opportunity for Iranian steelmakers

Washington's decision to go ahead with 25 percent tariffs on imported steel to the US will cause a hike in utilization rate of US steel producers which in turn will lead to higher demand for scrap consumption. Granite City, a subsidiary of US Steel in Illinois, USA, has been planned to restart due to expectations of higher demand for steel in the period ahead. As a result, the supply of scrap from the largest exporter of the world would experience a downfall. A cut in supply could pull up the scrap prices as the market has shown they have exceeded USD 375/MT in recent weeks.

Iran crude steel production surpassed 20 MT in 2017, of which 87% is being produced in electric arc furnaces. Unlike their Turkish and Southeast Asian counterparts, Iranian steel producers are not dependent on import scrap and supply their needs from the domestic market. So, a rise in scrap prices won't hurt their profitability.

In addition, Iran holds the title of the biggest DRI producer in the world. To this end, Iranian steelmakers enjoy a huge mass of a substitute to scrap with relatively lower prices compared to other parts of the world. Hence, a higher competitive yield is given to them over their competitors. This could result in more profitability for steelmakers in Iran and secure their margin.