NEW YORK A government shutdown that lasts more than a few of days will negatively impact U.S. steelmakers, harming a fragile economy and influencing demand, steel market sources said Oct. 1, although the effects may not be felt immediately.
"The lack of government funding will start to impact things that we care about," American Iron and Steel Institute president and chief executive officer Thomas J. Gibson told AMM. "It will start having effects on consumer spending and consumer sentiment, and thats probably the most immediate effect in the economy. Purchases of steel-containing goods will start slowing down. It could affect federal funding for highways in the longer term, though ... projects in the ground now will continue."
The shutdown will discourage market activity if purchasers feel business conditions are uncertain, Gibson said. Every week of a government shutdown would diminish quarterly gross domestic product (GDP) growth by 0.15 percent, Gibson said, while Lexington, Mass.-based financial forecaster IHS Global Insight Inc. said in a statement that each week of a shutdown would result in a loss of $1.6 billion in GDP, and reduce the fourth-quarter GDP growth rate by 0.16 percent.
Congressional action on major bills such as Customs reauthorization will also likely be put on hold.
"Congress will slow down. (The shutdown) will be the only thing leadership is focused on. Anything else competing for time will see fewer developments," Gibson said.
Government agencies immediately affected by the funding hiatus include U.S. Customs and Border Protection, which said Sept. 27 it would furlough nearly 7,000 employees in the event of a government shutdown; the Department of Commerce, which has delayed all its administrative deadlines relating to anti-dumping and countervailing duty laws; and the U.S. International Trade Commission, which is shutting down its investigative activities.
"In order to please the far right, they (House Republicans) are taking money out of the pockets of working Americans, and costing our nation jobs. Any manufactured crisis that further slows growth and costs jobs is unacceptable," United Auto Workers union president Bob King said in a statement.
Market participants said they anticipated the shutdown would have little effect on business short term, but a long-term funding hiatus could hurt their bottom line.
"Will this cause any significant issues? I think the simple answer is that in the short runother than minimal delays at the port due to staffing, or with the DOC they will just tack on the number of days that they are closed to any pending investigation schedulesI dont think so," a steel trader said. "But, in my opinion, if this in the unlikely case turns into a protracted shutdown then yes, the importing community will have problems and additional expenses, mostly with delay issues."