Brazil expects reduction of steel import quotas under Biden infrastructure plan

RIO DE JANEIRO, BRAZIL – The plan of the President of the United States, Joe Biden, to invest US$ 2.3 trillion in infrastructure, announced last week, raised the expectation of the Brazilian steel industry that Washington may review the quotas that limit the entry of imported steel, imposed by Donald Trump’s administration.

Marco Polo de Mello Lopes, president of the Brazil Steel Institute, representing Brazilian steelmakers, notes that the basis for an infrastructure program is steel, “but the American steel industry is not self-sufficient in raw material, and will need to import much more semi-finished steel.”

Of Biden’s package, US$621 billion in investments are aimed at modernizing 20,000 miles (32,000 kilometers) of roads, 10,000 bridges, as well as waterways, railroads, the electric grid, and more. “And he wants to do it with American-made steel,” celebrated the CEO of the American Iron and Steel Institute, Kevin Dempsey.

However, for Bloomberg, the “risks of Biden’s plan are great of attracting more foreign steel.” Among the biggest beneficiaries could be steelmakers from Brazil, South Korea, Vietnam, and Taiwan, for example, “but not so much the formerly powerful U.S. steelmakers that Biden – and Trump before him – promises to revive.”

American steel is too expensive for that, Bloomberg says, estimating that it costs US$300 more per ton than product from other countries. “It is more expensive, and the reason is direct truculence by Donald Trump, who has closed the American market,” confirms Marco Polo, without mentioning figures.

In any case, with Biden’s infrastructure project, the Brazilian industry sees chances to export more even with an “American First” project to recover the American steel industry.

Of US$2.3 billion of steel that Brazil exports to the US per year, on average, 85% is semi-finished steel for US steel mills to make the final product. The country is already the largest supplier to the U.S. in the category, with 60% of the total imported by Americans in 2020, followed by Mexico with 23.3% and Russia with 5.77%.

“It doesn’t make sense for American steelmakers, who are going to have to meet an exponential demand with the infrastructure plan, to be smothered by a quota regime,” says Marco Polo. “If there is the possibility of quota flexibilization, we will increase our supply to the US.” The executive notes that Brazil has two steel mills focused exclusively on exports – Ternium, in Rio de Janeiro and Pecém (CSP), in Ceará – in addition to the capacity of Arcelor Mittal and Gerdau.

Total U.S. steel imports have declined 36.7% since 2018. That’s when Donald Trump used the little-used Section 232 of the Trade Expansion Act of 1962 and surcharged foreign steel by 25%, claiming that the imports threatened Americans’ national security. Trump only made three exceptions, setting quotas for Brazil, Argentina, and South Korea.

In the case of Brazil, Washington used the average imports of the 2015-2017 period. It set an entry quota of up to 3.5 million tons of semi-finished steel without the additional tariff. For finished products with higher added value, it adopted a 30% reduction in the volume imported so that Brazil can sell a maximum of 700,000 tons per year.

The Brazil Steel Institute had already started to explore with authorities in Brasilia a movement for the revision of the quotas. Now, sending a joint mission to the United States is on the radar once again, provided travel restrictions are lifted.

Besides the role of traditional supplier of semi-finished products, the industry wants to argue in Washington for what it calls a “win-win”: at the same time that Brazil exports US$ 2.3 billion of steel to the US, it imports from there US$1 billion of metallurgical coal per year. And the more steel it produces, the more it will need American coal.

Biden will face a tough battle to get his plan through Congress. Meanwhile, competition is fierce in the international steel market, amplified by a “monumental excess” of 520 million tons in global production capacity. By comparison, Brazil’s capacity is 51 million tons, far higher than domestic demand.

Source: Valor