June 20, 2018 / 6:27 PM / 3 months ago

U.S. Commerce Dept probing steel 'profiteering' after tariffs

WASHINGTON (Reuters) - The U.S. Commerce Department is investigating recent steel price hikes to determine whether some market participants are “illegitimately profiteering” from new tariffs, Commerce Secretary Wilbur Ross said on Wednesday.

U.S. Commerce Secretary Wilbur Ross testifies before a Senate Finance hearing on "Current and Proposed Tariff Actions Administered by the Department of Commerce" on Capitol Hill in Washington, U.S., June 20, 2018. REUTERS/Kevin Lamarque

Ross told a Senate Finance Committee hearing that the price of steel in the U.S. market has risen far more than justified by the 25 percent tariff imposed by the Trump administration, possibly because of “speculative activity,” with some market intermediaries holding back inventories.

U.S. benchmark hot-rolled steel coil June futures prices HRCc1 were quoted at $902 (£684.8) per tonne on the New York Mercantile Exchange on Wednesday, up 53 percent from $589 a year ago.

“There’s no reason for tariffs to increase the price of steel by far more than the percentage of the tariff, and yet that’s what has been happening,” Ross said. “That clearly is not a result of the tariff, that’s clearly a result of antisocial behaviour by participants in the industry.”

Ross did not name any parties responsible for the price hikes. But he said the restart of some idled domestic mills would help alleviate any supply constraints by late this year, citing U.S. Steel Corp’s (X.N) restart of its Granite City, Illinois, blast furnace operations, which should add 2.5 million tons of raw steel output annually.

Ross also said that Commerce had made decisions in the first 98 requests for steel product exclusions by companies, approving 41 and rejecting 56.

The Commerce Department has received more than 20,000 individual steel product exclusion requests, with nearly 4,000 objections filed. For aluminium, Commerce has received 2,503 product exclusion requests, with 98 objections.

In addition to the 25 percent tariff on steel, the Trump administration imposed a 10 percent tariff on steel imports from certain countries.

Ross said relatively few of those requests will be granted because “many of them have no substance but have objections that were well grounded.”

In cases where product exclusions are granted, companies will be refunded the tariffs they paid on steel and aluminium imports, Ross said.

The Commerce Department later said the steel exclusion requests issued on Wednesday cover seven different companies importing steel products from Japan, Sweden, Belgium, Germany and China.

The companies include razor maker Schick Manufacturing Inc, cutting tool maker Nachi America, specialty steel supplier Hankev International, wire fabricator Zapp Precision Wire and steel mill equipment maker Woodings Industrial Corp.

Ross also said the Commerce Department was in the early stages of its Section 232 national security investigation into motor vehicle and auto parts imports, and no decisions made regarding whether tariffs are warranted.

Commerce was trying to conduct the investigation in a “very judicious very open and transparent manner,” Ross said. “We will try very hard to avoid there being any unintended consequences.”

Reporting by David Lawder; editing by Tom Brown and Leslie Adler

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