U.S. energy pipeline developers to seek exemptions to steel tariff

Seah Steel Holdings

14/03/2018 14:14

By Liz Hampton and Ju-min Park
    HOUSTON/SEOUL, March 14 (Reuters) - U.S. energy pipeline
developers say they intend to pursue exemptions to the Trump
Administration's proposed steel tariffs, as concerns grow for
those companies and from key exporters to the United States like
South Korea.
    "We have a number of pipeline projects that would be
impacted significantly by this cost increase," said Adam Bedard,
chief executive of Arb Midstream, an energy transportation and
marketing company. If exemptions become available, "we'd
certainly try and qualify for it."
    He was referring to the U.S. Commerce Department's effort to
devise a procedure for companies to apply to avoid paying a 25
percent tariff on imported steel or 10 percent on imported
aluminum.  
    Commerce has 10 days to come up with the procedure to apply
for exemptions from the steel and aluminum tariff declaration
issued last week. There is a national security exemption for
U.S. companies to buy steel items that domestic manufacturers do
not produce in the volumes or quality required. The president
also said exemptions would be available to certain countries.
 urn:newsml:reuters.com:*:nL2N1QR1H5    
    Imports account for 77 percent of the steel used in U.S.
pipelines, according to a 2017 study conducted for the pipeline
industry. Some manufacturers already have customers waiting two
years for pipeline to construct lines to carry shale oil and gas
from West Texas fields to U.S. Gulf Coast export hubs. 
    Energy trade associations fought for a way around the
tariff. They argued that U.S. manufacturers either do not offer
key metal grades or diameters, or have long production times
that would impede development of shale oil and gas pipelines. 
    NAmerico Partners LP, which is proposing a multibillion
dollar pipeline to move natural gas from west Texas to the U.S.
Gulf Coast, estimates the steel tariff would raise the cost to
its customers by between 2 percent and 4 percent.
    "We will do everything we are capable of to limit the impact
to our shippers," said Jeff Welch, the company's managing
partner. NAmerico has not yet made the final decision to begin
construction of the 468-mile (753 kilometer) pipeline, he said.
    Even with exemptions, tariffs could still raise costs and
slow down projects, said Nicolas Adrian McTyre, an Austin, Texas
attorney and former trial attorney for the Federal Energy
Regulatory Commission.
    "You are looking at a new regulatory hurdle potentially and
there are a lot of unknowns to that process currently." 
    
    SOUTH KOREA LOOKS ELSEWHERE 
    One of the primary providers of steel for pipeline companies
is South Korea. Manufacturers there have said they are
considering sending exports to other parts of the world due to
difficulties with shipping to the United States, even before the
tariffs go into effect.
    John Stoody, a spokesman for the U.S. Association of Oil
Pipe Lines, said at least one member firm, which he did not
name, tried to buy steel from South Korea in recent days, but
was rebuffed due to tariff uncertainty.
    "Foreign pipe sellers are hesitant to sell pipe," he said.
    Executives at steel companies in South Korea say the move is
nudging them toward non-U.S. markets. Seah Steel  003030.KS ,
whose sales to the United States account for 20 percent of total
revenue, is exploring other markets, a company official said.  
    Trump's tariff “will inevitably impact our exports, and make
it necessary for us to find a new channel for exports,” the Seah
official said. He declined to be named due to the sensitivity of
the matter.
    Seah acquired two U.S. plants in 2016 to reduce any tariff
burden, according to the company, but still has to rely on its
Korean manufacturing lines for U.S. sales.
    The U.S. Commerce Department said in April 2017 that it had
found that Korean steel producers had been unfairly dumping OCTG
in the U.S. market. 
    Imports of oil country tubular goods (OCTG) from South Korea
- which includes drill pipes, casing and tubings - were valued
at about $1.1 billion for the mid-2014 to mid-2015 period it
examined. That accounted for nearly 25 percent of all OCTG U.S.
imports, ahead of all other countries, Commerce said at the
time.     
    Commerce responded by raising duties as high as 24.9 percent
from a previous range of about 4 percent to 6.5 percent.
    "The best case is to get exempted but there’s nothing else
we can say," said Park Hoon, CEO of Husteel, on the sidelines of
a meeting between Korean government officials and industry
executives to discuss the tariffs. 
    He said nearly 80 percent of the company's business relies
on U.S. sales, and the company also is looking to other export
markets.

 (Writing by David Gaffen and Gary McWilliams; additional
reporting by Stephanie Kelly; Editing by David Gregorio)
 ((Gary.McWilliams@thomsonreuters.com; +1 713-210-8513;))