- US Share in Global Aluminium Declines, Steel Imports Rise.
- New 25% Tariff on Steel and Aluminium Imports Effective March 12.
- Brazil and Trinidad & Tobago Face Major Trade Disruptions.
The proportion of US imports in the world’s aluminium trade has been falling over the past few years, while that of US imports in the world’s iron and steel imports has been increasing. Any meaningful fall in US imports would call for an increase in domestic capacity, which involves heavy capital outlay and time. Demand for steel and aluminium products has picked up in anticipation of the new tariffs. But in the short run, inflationary pressures might drive up US steel prices, with a moderate effect on trade, reports Drewry.
US to Impose 25% Tariff on Steel and Aluminium Imports
The US will impose a 25% tariff on all steel and aluminium imports from March 12. The policy does away with country-specific exemptions and eliminates hundreds of thousands of product-specific tariff exclusions. Although these tariffs are likely to have long-term and short-term impacts on trade flows to the US, the short-term impact could be relatively low.
Impact on Major Exporting Countries
The majority of steel and aluminium items are shipped on bulk carriers and general cargo ships globally. With the new US tariffs imposed, Brazil will be the most impacted nation since it supplied 58% of seaborne iron and steel exports to the US in 2024. The effect on China will be less pronounced as its steel exports are not entirely reliant on the US market.
Trinidad and Tobago, which in 2024 shipped 92% of its iron and steel products to the US, also stands to suffer a steep reduction in US trade. New markets might be hard to find. China and Canada are already at the front of aluminium shipments to the US. If imports from China are reduced, then the US might find itself leaning more toward Canada and South Africa due to their shorter shipping distance. This change would rationalize supply chains while cutting tonne-mile demand in the aluminium business.
Effect on Shipping and Tonne-Mile Demand
Since a blanket tariff will be imposed, any decrease in US-China trade will have a significant effect on tonne miles. Two main trends are bound to emerge:
- Increased import prices may lead the US to enhance nearshoring activities, lessening dependence on shipping.
- The demand for breakbulk and dry shipping may decrease, impacting time charter (TC) rates unfavourably.
Small bulkers and breakbulk vessels mainly carry steel and aluminium, with general cargo ships frequently competing with Handysize bulkers in this trade. Historically, when Handysize time charter rates have declined, the same has happened to general cargo vessels. However, whenever the relocation of cargo from Handysize bulkers to general cargo ships happens, it can bring some respite to the latter.
US Steel and Aluminium Imports
During the last few days before the March 12 enforcement of tariffs, there will be a rush of US steel and aluminium imports as businesses stockpile these vital inputs. The pick-up in demand could spur spot rates for these commodities for a while, especially on small dry bulkers and general cargo ships. Significantly, one-year TCs have already begun to increase due to rising demand, as seen in the recent Baltic index rises for Supramax and Handysize ships in the last two weeks.
If the tariffs are imposed in full, top steel exporters like Brazil, which has been a major supplier to the US through maritime trade, might see a sharp decline in shipments in the long run. Supramax ships, which have represented two-thirds of all seaborne steel shipments to the US, will be most impacted. Other major trade partners, like Japan, South Korea, and Vietnam, will also see serious trade disruptions.
Global Trade Implications and Retaliatory Tariffs
Though the shipping sector can try to rebalance by modifying routes and vessel deployment, the repercussions of these tariffs will be felt much farther afield. The Transatlantic trade’s cornerstone, the European Union, has directly opposed such actions. China, in retaliation, has imposed retaliatory tariffs against US goods, further fueling international trade tensions. Other nations are likewise planning comparable countermeasures.
Given the interconnected nature of global trade, these tariffs could trigger widespread economic challenges, affecting markets and industries worldwide.
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Source: Drewry
