Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

The new US-Mexico-Canada Agreement (USMCA) trade deal officially went into effect on Wednesday, launching new framework for steelmakers, auto producers, and metal trade flows.


The USMCA is intended to jointly benefit all three North American trading affiliates, businesses, and workers by forming a more steady, equal trade that will promote expansion of the North American economy, the Trump administration indicated in a statement through its Office of the US Trade Representative (USTR). 


The agreement will also support the region’s progress as a global competitor in the progressive manufacturing segment, specifically benefitting steel makers in North America, according to the American Iron and Steel Institute (AISI). 


The treaty assists steel producers and related sectors by firming the current integrated supply chains in the district and by refining terms from the North American Free Trade Agreement (NAFTA). This will be carried out through strengthened rules of origin and enhanced regional value content requirements. 


Within the automotive industry, the USMCA requires that vehicles must contain 75pc North American content, increased from the prior condition under NAFTA at 62.5pc. At minimum, 70pc of an auto producer’s steel and aluminum buying must be derived from North America. This removes the “deemed origination” loophole used under NAFTA as producers were able to consider material of North American source, irrespective of its origin.


The North American steel industry also commended the launch of the USMCA, regarding it as an important milestone for the region’s steel segment, supply chains and employees. 


Kevin Dempsey, interim president and CEO of AISI, said that the enforcement of the USMCA denotes substantial success by the US, Canada, and Mexico that will serve the North American steel industry and related businesses.


Canada and Mexico are vital export markets for steel producers in the US, comprising almost 90pc of total exports from steel mills. The improved rules of origin under the new agreement, Dempsey continued, offers incentives in consuming North American steel, which supports strong manufacturing supply chains that use material largely made from the metal.


The USMCA will also tackle unfair trade practices, for example transshipment or circumvention and evasion of trade remedy orders. Dempsey added that the steel industry is optimistic about the trade agreement helping boost steel demand in North America and that steel producers are equipped to supply needed steel to auto and other customers so that they can meet the new regional value content requirements set forth in the USMCA.

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