Analysts predict steel-makers will lose in global showdown
Ukraininas steel producers were able to shrug off the 80 percent to 90 percent anti‑dumping tariffs that the United States imposed on their products last year. But a new package of U.S. tariffs may provoke a global trade war, and Ukraine is a prime candidate to get caught in the crossfire.
The steel import tariffs approved by U.S. President George W. Bush on March 5, which range from 8 percent to 30 percent, are expected to tighten steel markets around the globe, as countries retaliate to protect domestic producers. If that happens, Uk‑rainian steel producers, ranked seventh internationally in terms of production, are sure to lose ground in newly gained markets such as Asia, analysts warn.
“The U.S. tariffs could initiate a global metal war,” said Volodymyr Sidenko, director of economic programs at the Razumkov Ukrainian Center of Economic and Political Studies.
In some instances, Ukrainian exporters will be faced with a flood of new competitors in the markets they started focusing on last year.
In another scenario, some countries that used to export their higher‑grade steel, and use Ukrainian steel domestically, will now hang on to more of their production.
“When the U.S. closes its markets like this, many countries will reorient [their exports] toward other markets, including Ukraine’s main markets,” said Olha Pyndyuk, an economist at Kyiv’s International Center for Policy Studies. “It will become more difficult for Ukrainian metallurgical plants to export there.”
Pyndyuk worries that Ukrainian steel mills, which have high capacity but are inefficient compared with more modern foreign competitors, could lose badly needed contracts.
“Ukrainian metallurgical plants are not very efficient and can’t even compete well with Russian plants, which have access to energy at significantly lower prices,” Pyndyuk said.
It’s hard to find exact predictions of how much Ukrainian steel‑makers could lose. But Economy Ministry officials announced last week that Ukraine stands to lose anywhere from $63 million to $229 million as a result of lower exports to the United States alone due to the new tariffs. By comparison, Australian and Russian officials warned that their countries could lose up to $100 million and $400 million, respectively.
The U.S. decision to impose tariffs is
| Olha Pyndyuk, Center of Policy |
a response to domestic political pressure from steel producers, who are suffering from a global slump in steel prices.
Pyndyuk worries that the situation could get much worse if the World Trade Organization doesn’t intercede as promised, and allows other countries to respond with tighter import restrictions of their own.
If that happens, Ukraine’s economy could feel the pinch, given that metals accounted for about 35 percent of exports and 22 percent of industrial production last year.
On March 11, EU trade officials, fearful of a flood of imports from Asia and Latin America, announced their intention to impose tighter quotas on steel exporters such as South Korea, China and Brazil.
Sidenko says he hopes the WTO intervenes.
“It’s hard to make exact predictions, but if the situation escalates, there will be noticeable losses at Ukrainian metallurgical plants,” he added.
But Sidenko believes that intensified global competition could finally force some Ukrainian plants to quit their years of stalling and start focusing on quality, not just quantity.
Some Ukrainian mills, such as Mariupol‑based Illich Metallurgical Plant, downplayed the potential effect of the U.S. tariffs on their business, but seemed to focus only on the tariffs’ effect on imports to the United States, rather than on their broader impact.
“The U.S. sanctions will not directly affect Illich, because we basically don’t export anything to the U.S.,” said spokesman Serhy Mahera. “The countries we do export to are usually consuming our metal themselves, [not re‑exporting it to other countries].”
“Our [less expensive] steel could even prove more competitive than others’ in markets with such high tariffs,” Mahera added.
In a statement, Zaporizhstal took a similar line, analyzing the reasons for the tariffs in terms of American politics, but failing to address the effects in markets other than the United States.
The U.S. tariffs, officially approved on March 5, will take effect for three years starting March 20.
Ukraine has exported steel valued at more than $8 billion each year for the past two years. Last year, Ukraine exported 500,000 tons of steel valued at $114 million to the U.S., only a third of the 1.5 million tons shipped out in 2000.
