AKS AK Steel Holding Corp

The Commerce Department on Monday launched two new investigations into whether Chinese steelmakers are shipping metal to the U.S. via Vietnam to evade U.S. import tariffs.

The moves follow complaints made in September by U.S. makers of steel, who say Chinese mills are making steel and then shipping it to Vietnam for processing, in effect laundering the steel as Vietnamese.

Vietnam has emerged as the U.S.'s biggest new source of steel this year, with imports from Vietnam increasing to 556,000 metric tons during the first nine months of 2016, from 36,000 tons in the first nine months of last year, a surge that helped to deflate domestic steel prices and keep pressure on profit margins in the U.S.

At the same time, Chinese steel shipments to Vietnam are also increasing.

Earlier this year, the U.S. imposed new tariffs, as high as 266%, on Chinese steel, a move that allowed U.S.-based steelmakers to charge more.

With more steel from Vietnam starting to flood into U.S. ports after the tariffs were erected against Chinese steel, steelmakers including Steel Corp., Nucor Corp., AK Steel Holding Corp. and ArcelorMittal, filed a complaint.

They allege Chinese steelmakers have built up networks of processing companies in Vietnam that are in effect their subsidiaries.

One inquiry will look at so-called "cold-rolled steel," which is steel that has been processed and cut for its final customer after it has been made at a mill and rolled into coils. The other inquiry will scrutinize corrosion-resistant steel, metal that has been coated with another metal such as zinc.

The probes could result in new tariffs on steel imported from Vietnam that is believed to have originated in China, under rules designed to prevent such a tariff-evading practice, known as circumvention. They would prop up steel prices in the U.S. The Commerce Department is likely to decide on the issue within 300 days.

The benchmark hot rolled coil index has fallen to $471 a ton, from $630 a ton in early July.

The contest to contain the market glut of metals from China extends beyond steel. Commerce and the Department of Homeland Security are also looking at whether China Zhongwang Holdings Ltd., one of that nation's biggest aluminum producers, improperly shipped aluminum through Mexico and transformed the metal at a plant in New Jersey to avoid U.S. import tariffs. China Zhongwang has denied any improper activity.

Write to John W. Miller at john.miller@wsj.com

(END) Dow Jones Newswires

November 07, 2016 17:05 ET (22:05 GMT)

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