March 9, 2018 / 10:30 PM / in 3 months

American customers stockpile Canada steel as tariffs loom: sources

MONTREAL, HAMILTON (Reuters) - American customers are stockpiling Canadian steel ahead of new import tariffs due to be imposed by U.S. President Donald Trump later this month, according to industry sources familiar with the matter.

Coils of steel sit in storage in a port authority facility in Hamilton, Ontario, Canada, March 9, 2018. REUTERS/Peter Power

The resulting spike in demand for Canadian steel is creating some supply disruptions, they said.

Canada, the biggest supplier of steel to the United States, escaped Trump’s steep import duties along with Mexico in his announcement on Thursday, but the two countries could still face steel import duties if they fail to negotiate a successful NAFTA trade deal.

One steel trading source in Canada said American customers, both warehouses and steel users, had been buying up Canadian metal in the spot market, because of the threat of a tariff, but supply was limited.

Trump on Thursday pressed ahead with slapping import tariffs of 25 percent on steel and 10 percent for aluminum, effective later this month.

Flavio Volpe, president of the Automotive Parts Manufacturers’ Association said on Friday that he had been informed about cases of steel stockpiling.

Volpe said the stockpiling was raising fears of higher prices in a “sector that already runs on tight margins.”

Trump’s Thursday announcement sent the S&P Global Platts daily price assessment for US-made hot-rolled steel coil up to $844.50 per short ton, up more than 4.0 percent from Wednesday.

One Detroit-area steel distributor said customers have been trying to stockpile steel, even at higher prices, for everything from auto parts to factory equipment. The distributor’s Canadian steel supplier is already rationing shipments for customers.

Steel prices were already on the rise in the U.S. market, with hot-rolled coil up nearly 19 percent in February 2018, on an annual basis, buoyed by demand from the construction, automotive and energy sectors, said Joe Innace, Platts’s content director, metals/Americas.

Trump ordered a probe into whether steel imports threaten U.S. national security last April. The Commerce Department released the delayed results of the “Section 232” investigation in January and steel prices had been steadily rising in advance.

“We feel they (steel prices) will continue to go up,” said a third source. “Canada just dodged a bullet, but the battle isn’t over.

The source who works at a service center that supplies the auto sector in the United States and Canada said he is purchasing more steel products from mills in both countries.

All three sources spoke on condition of anonymity because they didn’t want to publicly discuss industry purchasing trends.

Reporting By Allison Martell and Allison Lampert, additional reporting by Joseph White in Detroit, editing by Clive McKeef

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