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Titan the reins

Jan 30, 2017 | 11:31 AM | Fastmarkets AMM staff

Tags  White House, president, Donald Trump, Carl Icahn, Wilbur Ross, M. Robert Weidner, MSCI, Philip Gibbs KeyBanc Capital Markets Inc.

The steel industry has a strong presence on commerce, trade and other issues in the new administration of President Donald Trump following a number of key appointments as well as advisors who have worked for years to improve conditions within and on behalf of steel and other metals.

Among the numerous business leaders who will populate President Donald Trump’s administration, several have long and close histories in the metals sector, giving the industry, and steel in particular, a strong presence in the corridors of power for at least the next four years.

In just one example of the administration’s expected pro-business stance, Carl Icahn, the billionaire Wall Street investor who will be Trump’s special advisor, said in a transition team statement that it was time to “break free of excessive regulation” and let businesses create jobs.

And Secretary of Commerce appointee and steel veteran Wilbur Ross said, “I think I’ve probably had more direct experience than any prior Cabinet nominee has had with unfair trade in the steel business, in the textile business, in the auto parts business and other sectors. I am very well aware of the issues many companies face, and I’m sensitive to both the issues abroad and the issues here at home.”

Statements such as these coming from business titans with ties to steel have created some excitement among industry leaders.

“I’m more optimistic today than I have been in a long time,” MSCI president and chief executive officer M. Robert Weidner III said. “The mood of the industrial heartland is clearly much more positive, and the voices of many are being heard.”

“We’ve been given this moment in time where the country has so many business leaders now involved in setting public policy,” Weidner said. “The stage is set now where the business community’s voice will be heard more than it was ever heard in the last eight years.”

Trump has been pegged by many in the metals sector as a champion for industry due to his business savvy, hard-line trade policies and assurances that his administration will rein in regulations.

“He has given us hope, and hope drives business,” one industry source told AMM.

While some in the metals sector praised moves such as the GM bailout and 2009’s Cash for Clunkers program, many were critical of the Obama administration’s stances on health care, taxes and business regulations.

Furthermore, the steel and aluminum sectors in particular believed that the post-Great Recession stimulus package did not provide enough relief via infrastructure investment. Whether that was the fault of the last president or Republicans in Congress didn’t matter. Business leaders in the metals industries were ready for a new direction, and they overwhelmingly are expressing the hope that they have it in a Trump presidency.

“People feel (the government) will not continue to regulate every little movement. ... It is like we have been released from an island that was very small, and now there is room to move,” an industry source said.

Steel will be a “favored child” for the next four years and potentially the next eight under President-elect Trump, said Philip Gibbs, metals and mining equity research analyst at Cleveland-based KeyBanc Capital Markets Inc.

For proof, look no further than Trump’s appointments: investor and steel industry veteran Wilbur Ross is the incoming Commerce Secretary and trade attorneys have been picked for other powerful roles in the administration. Robert Lighthizer, for example, has been nominated to be United States Trade Representative (USTR). He is a partner in the international trade practice at Washington-based law firm Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates, and he has long represented Pittsburgh-based U.S. Steel Corp. in trade disputes.

Dan DiMicco, former chief executive officer, of Charlotte, N.C.-based Nucor Corp., headed Trump’s “landing team” for USTR. In an e-mail to AMM, he said he will remain active with transition efforts through the end of January.

And the “landing team” for the USTR also included veteran trade attorneys Jeffrey Gerrish and Stephen Vaughn, both of whom have extensive experience in steel anti-dumping and countervailing duty proceedings.

Weidner said he is particularly optimistic about Trump’s selection of Ross, Lighthizer and Peter Navarro to direct the National Trade Council, as well as the appointment of businesspersons into positions such as Secretary of State (Exxon Mobil Corp.’s Rex W. Tillerson) and Secretary of Labor (CKE Restaurants Holdings Inc.’s Andrew Puzder).

Ross was nominated for Secretary of Commerce. He founded private equity firm WL Ross & Co. LLC and has been involved in the restructuring of more than $200 billion of defaulted companies’ assets around the world.

“I am not anti-trade. I am pro-trade. But I am pro-sensible trade, not trade that is detrimental to the American worker and to the domestic manufacturing base,” Reuters reported Ross stating in a prepared testimony designed for the Senate Commerce, Science and Transportation Committee.

The Trump administration intends to bring steel and manufacturing jobs back to the United States by shredding or renegotiating multinational free-trade deals, including the North American Free Trade Agreement (Nafta) and Trans- Pacific Partnership (TPP).

Trump has called Ross a “champion” of American manufacturing. “Most importantly, he is one of the greatest negotiators I have ever met,” Trump said.

Ross formed International Steel Group Inc. (ISG) in 2002 by consolidating former steel behemoths LTV Steel Corp. and Bethlehem Steel Corp., as well as Weirton Steel Corp., Acme Steel Inc., Georgetown Steel Corp. and the plate operations of U.S. Steel Corp.

ISG was purchased in 2004 for more than $4 billion by what is now the world’s largest steelmaker, Luxembourg-based ArcelorMittal SA.

Trade attorney Robert Lighthizer has been nominated to serve as the next U.S Trade Representative (USTR), where he will be the president’s chief negotiator, adviser and spokesman on trade issues.

Trump said in announcing his choice that Lighthizer would help “fight for good trade deals that put the American worker first.”

Lighthizer is a partner in the international trade practice at Washington-based law firm Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates, a role that has seen him represent Pittsburgh-based U.S. Steel Corp. in anti-dumping and countervailing duty petitions.

An early Trump supporter and a trade hawk, Lighthizer has said that Republicans’ “blind faith” in free trade was misplaced, especially with regard to China.

“Years of passivity and drift among U.S. policymakers have allowed the U.S.-China trade deficit to grow to the point where it is widely recognized as a major threat to our economy,” Lighthizer wrote in 2010 congressional testimony.

“Going forward, U.S. policymakers should take these problems more seriously, and should take a much more aggressive approach in dealing with China,” he wrote.

“Is free trade really making global markets more efficient? ... Or is it simply strengthening our adversaries and creating a world where countries who abuse the system—such as China—are on the road to economic and military dominance?” Lighthizer wrote in a 2011 letter to The Washington Times.

Peter Navarro has been named to head the newly created White House National Trade Council. He’ll also serve the president-elect as director of trade and industrial policy.

Navarro will coordinate with other agencies and advise Trump on “innovative strategies in trade negotiations,” according to a Dec. 21 press release from the president-elect’s transition team.

Navarro, professor of economics and public policy at the University of California at Irvine, is a hawk on trade with China. He blames Beijing’s “mercantilist” trade policies and “unfair trade practices” for slow gross domestic product (GDP) growth in the United States.

Navarro is also the author of the book The Coming China Wars and director of the film Death by China, which Trump has praised as “right on.” Navarro also has blasted the U.S. Treasury Department for not singling out China for allegedly manipulating the yuan.

Washington veteran Rolf Lundberg will assume the role of deputy director of the National Trade Council’s “Buy American, Hire American” project.

Trump has pledged to spend as much as $1 trillion to repair U.S. infrastructure. In steel, “Buy American” refers to government-funded projects that require steel to be melted and poured in the United States

Lundberg’s efforts will focus on “policies to reverse the economic injustice of offshoring,” Trump’s transition team said.

He was previously senior vice president for congressional and public affairs at the U.S. Chamber of Commerce.

Wall Street investor Carl Icahn has been appointed as a special adviser who will offer suggestions on how to ease regulations so companies can focus on business.

“Under President Obama, America’s business owners have been crippled by over $1 trillion in new regulations and over 750 billion hours dealing with paperwork. It’s time to break free of excessive regulation and let our entrepreneurs do what they do best: create jobs and support communities. Regulatory reform will be a critical component of making America work again,” Icahn said in a statement.

Trump’s announcement indicated that Icahn is equipped for the position due to his success as a businessman and investor. “Icahn will be a leader in helping American entrepreneurs shed job-killing regulations that stifle economic growth,” it said.

Icahn has positions in many metals, recycling, mining and automotive companies, including Mayfield Heights, Ohio-based PSC Metals Inc. Icahn Enterprises’ latest annual report notes that one of Icahn’s core strengths is “managing complex legal, regulatory or financial issues, which may include bankruptcy or insolvency, environmental, zoning, permitting and licensing issues.”

“Carl was with me from the beginning, and with his being one of the world’s great businessmen, that was something I truly appreciated,” Trump said in a statement. “His help on the strangling regulations that our country is faced with will be invaluable.”

But even among those who are hoping for progress under Trump’s leadership caution that the path forward won’t necessarily always be smooth.

“I think you have a zeitgeist in this country right now that says, if we want trade, we want it to be fair and to benefit American workers and American companies,” Philip Bell, president of the Steel Manufacturers’ Association (SMA), told AMM.

“It’s cause for optimism. But now you need to turn that political rhetoric into political reality. And it’s wait and see on that,” he said.

For starters, the domestic steel industry would like to see the Trump administration designate China and perhaps other countries as currency manipulators, Bell said. Such a move would allow U.S. trade officials to impose countervailing duties to the extent a currency is deemed to be devalued, he said.

It’s also important to keep in mind that the policies Trump might implement aren’t without precedent. The United States has implemented steep tariffs when the dollar was strong and oil prices were weak, notably in the 1980s and the early 2000s, Gibbs said.

“The unknown is how far this administration takes it,” Gibbs warned. “Because for every action, there is a reaction. And I don’t know that anyone has contemplated what the global reaction to this might be or that it might force (the Trump administration) to take more of a middle ground as time passes.”

When it came to Ford Motor Co.’s recent cancellation of its $1.6 billion compact car production facility in San Luis Potosi, Mexico, in favor of performing a $700 million update on its Flat Rock, Mich., plant, Michael Harley, an executive analyst with Irvine, Calif.-based Kelley Blue Book Co., feels the events are merely coincidence. Despite appearances, he said, Ford’s decision has little to do with Trump.

“Any decision by a major automaker to close a plant, (or) shut down a plant for a week or two, is based on purely financial reasons,” Harley told AMM. “(Did) our President-elect’s tweet affect a multibillion-dollar company? Highly unlikely.”

Still, Trump expressed gratitude Jan. 4 for Ford’s decision to pull the plug on San Luis Potosi, tweeting, “Thank you to Ford for scrapping a new plant in Mexico and creating 700 new jobs in the U.S. This is just the beginning— much more to follow.” In November, Trump issued a series of tweets taking credit for a decision by Ford to keep its assembly plant in Louisville, Ky., open - despite Ford having no plans to shutter it.

“What you’ve seen so far has more to do with capacity utilization than politics,” said David Zoia, executive director of content for Wards Automotive Group, who agrees with Harley’s assertion that Ford’s decision was unrelated to Trump’s tweeting. Zoia believes it had everything to do with slumping car demand, along with under-capacity at Flat Rock.

However, it may be no accident that Ford president and chief executive officer Mark Fields seemed to echo Trump’s politics when announcing his company’s decision at a news conference Jan. 3, stating, “Make no mistake about it—Ford is a global automaker, but our home is right here in the United States.”

On the trade front, there already have been indications that Trump could take an aggressive stance on policy, especially regarding China.

Gerrish—partner in the international trade practice at Washington-based law firm Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates—has previously indicated that traditional trade petitions are too slow to bring relief to companies alleging that they have been injured by imports, noting in 2015 that the high standard for filing can cause pain before providing relief.

He has also pointed to structural overcapacity in China’s steel industry as a threat to markets in the United States and abroad.

Additionally, Gerrish has accused the World Trade Organization of being biased against U.S. producers in trade petitions targeting imports of oil country tubular goods (OCTG) from South Korea, a case in which his firm represented Pittsburgh-based U.S. Steel Corp. Gerrish has worked on a trade petition targeting OCTG from China as well, according to Commerce Department documents.

Vaughn, a partner in the International Trade Practice Group at King & Spalding LLP, has represented Wheatland Tube Co., a subsidiary of Chicago-based Zekelman Industries Inc., in a trade case targeting carbon welded steel pipe from China. He has more recently worked on behalf of West Chester, Ohio-based AK Steel Corp. on an anti-circumvention case.


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