LONDON, Aug. 17, 2020 /PRNewswire/ — Efforts to reshore critical supply chains and secure access to strategic materials have become a top political issue for many countries, and trade barriers are a common tool used by governments to help protect local producers of strategic materials.
However, trade policy enforcements sometimes lead to market distortions in other parts of the supply chain, as industry participants with different incentives re-configure their procurement strategies to accommodate a changing legislative environment.
This Insight presents a case study on how the US transformer market has responded to trade actions targeting a niche steel product known as ‘grain-oriented electrical steel’ (GOES) in recent years, and how these industry responses have affected market balances for value-added products downstream of GOES sheet.
Earlier in May of this year, the United States Department of Commerce launched a probe to determine whether imports of products used in the US bulk power system were shipped in quantities or circumstances to threaten national security. The investigation was initiated under Section 232 of the Trade Expansion Act, the same piece of legislation used two years ago to bring 25% tariffs on steel mill imports from most countries.
The probe is centered on products known as laminations and stacked/wound cores, which are components of power or distribution transformers. Transformers are an integral component of the power grid, since they serve as a critical link or bridge between the three main stages of electricity delivery from producer to consumer: power generation, transmission, and distribution. Given the vital importance of electric power grids to matters of economic development and national security, efforts to safeguard the power grid and its raw materials supply chain have become paramount.
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