Steel industry participants had mixed reactions to President Donald Trump’s announcement that the United States will impose tariffs of 25% on steel product imports next week, with many anticipating higher prices as a result.
The announcement, made on Thursday March 1 during a meeting with steel and aluminium industry executives, follows harsh recommendations made by US Commerce Secretary Wilbur Ross in February as part of his department’s Section 232 investigation. No other details were released, although Trump said that the tariff would be in place "for a long period of time."
“Assuming domestic prices rise 25%, then you could just bring in the same material, just for sale below what the domestics are asking. It’s still worth it to purchase abroad,” one consumer source told American Metal Market, adding that he thought a higher tariff could have been imposed or some sort of quota system.
“Everyone thought it would be 52% and this will still make imports cheap for electrical steel, so this is not a win for AK Steel. Cold-rolled and galvanized [steel will] still be able [to be imported] cheaply [at a 25% tariff] too," a mill source said.
But AK Steel said on March 1 that it “supports President Trump’s announcement today, in which he indicated that next week he will formally announce significant tariffs on imported steels.”
“This is a strong, important step to combat the effects of global steel overcapacity and address actions by other countries to circumvent US trade laws and orders designed to ensure a level playing field," AK Steel chief executive officer Roger Newport said in a statement.
A service center source expects a “short- to medium-term pop” in prices, he said, but “no major changes long term, in my opinion. Just pushes the same import levels as before, just up in pricing. It’s still a positive for the domestic industry overall.”
Assuming a 25% tariff on all or almost all steel imports, “US steel prices should continue to rally until imports are again cost competitive as consumers scramble to secure volumes not produced domestically at present,” Seth Rosenfeld, an equity analyst at New York-based Jefferies, said in a March 1 research note.
But it is unclear if prices will move any higher because “they’ve been going crazy at the prospect of this announcement. Are prices going to go more crazy? I don’t know. It’s already insane. Like really, really insane,” one distributor source said.
American Metal Market’s hot-rolled coil index rallied last week to highs not seen since June 2011, moving to $38.65 per hundredweight ($773 per ton) on February 22.
Meanwhile, foreign markets could also see disruptions if the US drastically cuts its steel imports, since that material will have to enter other countries. “In the current context of massive global excess steel capacity, markets will be forced to take preventive contingency actions to avoid domestic market disruption from trade deflection,” Axel Eggert, director general of the European Steel Association, said in a statement.
Still, many industry participants were encouraged by the news and spoke about the possible resurgence of the domestic steel industry.
“My inventory just became worth a lot more money,” the distributor source said, adding that “it’s a way [for producers] to finally get profitable. They can get competitive. But my manufacturing friends are freaking out.”
Indeed, Trump said during the meeting that he expected “pretty much all [of the companies present] to be immediately expanding if we give you that level playing field.”
The fallout from the harsh tariffs that were imposed on imports of washing machines and solar panels in January is encouraging evidence of the impact that aggressive trade moves can have, Trump said. “Now we have plants being built [for washing machines]. We haven’t seen that for many, many years.”
The “massive excess steel capacity in the world today” has led to “idled plants and the loss of thousands of jobs” in the US. “We are pleased that the president is addressing this issue,” according to American Iron and Steel Institute president and CEO Thomas J. Gibson.
“We believe the remedies will provide the additional measures required to ensure the competitiveness of the steel industry in the US,” ArcelorMittal USA CEO John Brett said in a statement.
The Chicago-based company “is evaluating the market dynamics created by this decision and remains committed to advancing the long-term sustainability of our USA operations,” he added.
“We are pleased that the president has decided to use all the tools at his disposal to send a clear message to foreign competitors that dumping steel products into our market will no longer be tolerated,” Nucor Corp president and CEO John Ferriola said in a statement.
But other industry participants were worried about the potential fallout on consumers and what the action could mean for domestic jobs.
“The tariffs will lead to the US once again becoming an island of high steel prices, resulting in our customers simply importing the finished part,” Roy Hardy, president of the Precision Metalforming Association, and Dave Tilstone, president of the National Tooling and Machining Association, said in a joint statement, adding that “thousands of jobs” will be threatened.
“While we have been pleased with the Trump administration’s enthusiastic support for manufacturing, we believe this step to be injurious rather than helpful to our efforts to increase American manufacturing and create jobs,” according to Stephen Yurek, president and CEO of the Air-Conditioning, Heating & Refrigeration Institute.
The action will “destroy many tens of thousands of jobs” and “will inevitably invite retaliation from America’s most reliable allies, ultimately hurting American non-manufacturing industries as well,” Tadaaki Yamaguchi, chairman of the Japan Steel Information Center, said in a statement.
Many industry participants also cited the need for additional information on the tariffs, stating that it was difficult to fully interpret what the tariffs could mean without all of the details.
“It was just a pretty broad statement,” the consumer source said, noting that there was no indication of whether there would be exemptions for any products or countries.
“A decision to restore sanity to global steel markets will help create domestic jobs and preserve our national security. But to achieve those results the president’s enforcement action must be broad, robust and comprehensive,” Scott Paul, president of the Alliance for American Manufacturing, said in a statement.
Michael Cowden, Chicago; Lisa Gordon, Pittsburgh; and Thorsten Schier, New York, contributed to this article.
Editor's note: This article was updated on March 2, 2018, to include statements from AK Steel.