Lisa Reisman | Posted on September 14, 2018 |
Grain-oriented electrical steel (GOES) prices fell for the second month in a row, with multiple large power equipment manufacturers requesting exclusions from the Section 232 tariffs. Need buying strategies for steel? Request your two-month free trial of MetalMiner’s Outlook What makes these requests noteworthy involves the arguments made by each of the firms. One of the most interesting arguments pits two different firms on opposite ends of the national security argument – Eaton Corp (parent company of Cooper Power Systems) and AK Steel. The Section 232 exemption request form asks a specific question with regard to whether the steel is used to support national security requirements. Cooper Power responded by stating the materials in the exemption are used to make transformers for the electrical grid, of which infrastructure is considered essential to national security: “This product allows Cooper Power Systems, LLC to meet federally maintained efficiency requirements in Liquid Filled Transformers as published by the D.O.E.” The Cooper Power request involved, “chemically etched or mechanically scribed Domain Refined Grain Oriented Electrical Steels, capable of retaining domain refined properties post anneal, used in the manufacture of Distribution Transformers,” according to its exemption request. Cooper Power argued “the only domestic producer of electrical steels in the U.S., does not manufacture a Domain Refined Electrical Steel capable of being annealed after Transformer core production, while still retaining the Domain Refined properties.” Ironically, Metglas, and not AK Steel, offered a rebuttal to the Cooper Power exclusion request that specifically addressed alternative products, notably amorphous ribbon, that could meet DOE requirements. Metglas also challenged the volumes Cooper Power had indicated – specifically that the volumes requested in the exclusion far exceed Cooper Power’s actual volume requirements. Meanwhile, ABB’s exclusion request cited insufficient U.S. availability of 27M-0H, which it claims is not manufactured in the U.S. (This grade is high-permeability GOES.) AK Steel — the only mill that challenged the ABB exclusion — made several arguments in its rebuttal, including:
ABB has moved away from several suppliers in the US and globally over the past few years. Changing suppliers and materials seems to be less of a concern to ABB when it achieves a financial return by purchasing foreign GOES. AK Steel is, and has been for many years, the largest supplier of GOES to the U.S. market. ABB knows AK Steel’s product very well and both ABB and its customers can plan to incorporate AK Steel GOES with little effort or hardship, just as they have in the past.
The company goes on to say, “As the largest domestic producer of GOES, a large percentage of transformers utilize AK Steel GOES products and it is a very well-known and broadly utilized product, both by ABB and their customers.” However, neither the buyer or supplier has explained fully why the GOES market appears more opaque than many other steel markets.
In reality, power equipment manufacturers deploy a more multifaceted approach to the GOES sourcing decision. In fact, multiple GOES grades can meet various requirements as established by the DOE but the ultimate award decision made by a buyer considers many variables, such as: core loss, regulatory requirements, and the price arbitrage among alternative GOES products at any one given time. Together, these variables impact the buying decision. From a sourcing perspective, manufacturers want and need the ability to maintain flexible sourcing options, not only to mitigate risk but to minimize the pricing power of a monopoly supplier. Moreover, the transformer market is dominated by global players who can easily shift production of transformer cores elsewhere (as they did after the unsuccessful 2014 anti-dumping case brought by AK Steel). Buying organizations will continue to shift production away from the U.S. if the sourcing equation does not make economic sense. Regardless, should Big River Steel indeed move into this market — as many hope that they will — AK Steel will need more than Section 232 to defend its market position. In a subsequent post, MetalMiner will address the exemption request from Posco and the Section 301 tariffs.
The U.S. grain-oriented electrical steel (GOES) coil price fell for the second month in a row from $2,857/mt to $2,763/mt. The MMI fell seven points from 207 to 200. For more efficient carbon steel buying strategies, take a free trial of MetalMiner’s Monthly Outlook! The GOES MMI® collects and weights 1 global grain-oriented electrical steel price point to provide a unique view into price trends over a 30-day period. For more information on the GOES MMI®, how it’s calculated or how your company can use the index, please drop us a note at: info (at) agmetalminer (dot) com.
Filed under: Ferrous Metals, Metal Prices, Sourcing Strategies
Your email address will not be published. Required fields are marked *
Save my name, email, and website in this browser for the next time I comment.
Aluminum aluminum price aluminum price index anti-dumping China china aluminum coking coal price Copper copper price copper price index ferrochrome price ferromoly price Ferrous Metals GOES price Gold gold price Green India Iron Ore iron ore price L1 L9 LME LME aluminum LME copper LME nickel LME steel billet nickel price Non-ferrous Metals Oil palladium price platinum price precious metals prices rare earths scrap aluminum price scrap copper price scrap stainless price scrap steel price silver price Stainless Steel stainless steel price Steel steel futures price steel price steel price index
MetalMiner helps buying organizations better manage margins, smooth commodity volatility, generate cost savings and negotiate prices for metal commodities. The company does this through a unique forecasting lens using artificial intelligence (AI), technical analysis (TA) and deep subject matter expertise.
©2022 MetalMiner All rights reserved. | Cookie Consent Settings & Privacy Policy | Terms of Service