BlueScope, Rio big winners from US tariff exemptions
Rio Tinto and BlueScope Steel are the big winners from Australia’s exemption from US steel and aluminium tariffs.
Rio Tinto and BlueScope Steel are expected to emerge as the big winners from Australia’s exemption from US steel and aluminium tariffs set to come into force in a matter of weeks.
The nation exports $US210 million ($267.4m) in steel and $US213m in aluminium to the US each year.
Rio ships 1.4 million tonnes of aluminium to the US from Canada, while BlueScope has $US3 billion in assets and employs more than 3000 workers in the US.
The company exports Australian steel to its US businesses for further value-adding.
BlueScope chief executive Mark Vassella attributed the exemption from tariffs — 25 per cent on foreign steel and 10 per cent on foreign aluminium — to Australia’s status as a long-term ally, as well as the US benefiting from a healthy surplus in two-way trade.
“So we believe our unique position puts us in the right frame of mind for (President Donald Trump) to consider those special circumstances,” Mr Vassella said.
“We’ve argued for a fair treatment of our important manufacturing businesses for almost 12 months now, and we’ve been supported superbly by the Prime Minister, the Trade Minister (Steve) Ciobo, the Department of Foreign Affairs and Trade and the ambassador on the ground in Washington.
“There’s a clear recognition about Australia’s status as an ally and our four-to-one trade surplus in America’s favour.”
BlueScope has three businesses in the US, with the biggest being hot rolled coil maker North Star.
“North Star is set to benefit from proposed tariffs with higher expected prices leading to widening spreads. The business accounts for 26 per cent of BlueScope’s earnings,” said UBS steel analyst James Brennan-Chong.
The other two businesses — Steelscape and North American Building Solutions — are small in the context of BlueScope’s overall portfolio, accounting for about 10 per cent of group earnings.
UBS’s Mr Brennan-Chong expects some short-term volatility in global steel prices as markets assess the impact of the steel tariffs. Amid suggestions that Mr Trump’s move could spark a global trade war, China said yesterday it would not up the ante, but vowed to defend its national interests in the face of growing American protectionism.
“There are no winners in a trade war, and it would bring disaster to our two countries as well as the rest of the world,” Commerce Minister Zhong Shan said at a briefing on the sidelines of China’s annual parliamentary session.
“China does not wish to fight a trade war, nor will China initiate a trade war, but we can handle any challenge and will resolutely defend the interests of our country and our people.”
Mr Zhong accused the US of overstating its trade deficit with China by about 20 per cent every year.
He said controls over US hi-tech exports contributed to China’s $US20.9bn trade surplus in February.
The Trump administration earlier approved higher tariffs on Chinese-made washing machines, solar modules and some other goods, prompting Beijing to accuse Washington of disrupting global trade regulation by taking action under US law instead of through the World Trade Organisation.
Mr Trump honoured a campaign pledge last Thursday by announcing the tariffs, saying they were designed to “defend the American worker”.
The Turnbull Government believes it has an exemption, like those granted to Mexico and Canada, and has been using all means possible to try and lock it in.
Mr Trump and Malcolm Turnbull announced the deal on the social media platform Twitter over the weekend.
While legal paperwork confirming the exemption was yet to be completed, Mr Turnbull said an executive order would formalise Mr Trump’s direction.
Mr Ciobo yesterday denied there was any side-deal to the agreement, including linking trade and military promises.
However, writing in The Australian on Friday, Mr Ciobo said the fusion of protectionism and patriotism could lead to “economic ruin”.
Trade expert and visiting fellow at the ANU’s Centre for Applied Macroeconomic Analysis Andy Stoekel said a tariff on steel, by itself, would not plunge the world into a recession.
“But the real danger is that the US is definitely on a protectionist path,” Mr Stoekel said.
“The US will bear the biggest cost of that, and the danger is that other countries will introduce safeguard duties.
“Trade is one of our pillars of prosperity. Our standard of living would plummet without it.”
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