A $200 million market is so small as to be beneath most readers’ notice, except when its has the potential to escalate frictions between the US and China. The US has been selectively investigating markets where the Chinese are purported to be engaging in anti-competitive practices and taking action. The first salvo occurred last September, the US imposed tariffs on Chinese tires, a $1.3 billion market. China reacted quickly and badly, launching investigations into US auto parts and chickens ($1.2 billion). In the last six months, the US found that China has dumped $2.8 billion of tubular steel, as well as stainless steel pipe. Geither was under pressure from Congress to brand China a currency manipulator in April, and the Chinese made it abundantly clear they would retaliate in some fashion. Geithner managed to put off taking action till the next certification date, in October. For now, the tit for tat seems measured, even if both sides are increasingly agitated.
The latest contretemps is over steel drill pipe. From the Wall Street Journal:
In a move that could escalate trade tensions between the U.S. and China, the Department of Commerce found that Chinese drill-pipe makers were selling roughly $200 million of pipes in the U.S. for less than their market value.
The ruling, while preliminary, places a 15.7% subsidy on finished and unfinished drill pipe, mainly used for oil and natural gas extraction, coming into U.S. ports beginning Wednesday. The subsidy is applied to the selling price of the pipe, not including ocean freight or insurance….
The drill pipes in the latest case are used on both offshore and onshore rigs drilling for oil and natural gas. Drilling contractors such as Transocean Ltd., Helmerich & Payne Inc. and Patterson-UTI, as opposed to oil and natural gas companies, purchase this type of pipe. The pipes, depending on their uses, can sell for $3,000 to $6,000 a short ton, making them one of the most expensive pipes steelmakers can sell.
The U.S. is one of the largest markets for drill pipe. Even though there are other countries that produce more oil than the U.S., many of them need far fewer operating drill rigs, because each rig produces much more oil.