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Auto sales, for example, were solid last year despite rising costs for both steel and aluminium, Ross said. And even when steel and aluminium prices are volatile, “there hasn’t been any noticeable dislocations coming from it..”
Steel prices make up only a fraction of the retail cost of a car or truck. In other industries, such as canned beverages and food, “it’s even more trivial … a fraction of 1 cent,” he said.
In other words, President Donald Trump and his administration don’t buy the argument that tariffs or quotas might create market disruptions or job losses at downstream industries, he said.
Ross made the comments during a conference call with reporters on Friday February 16 about the Section 232 remedies he has proposed to the president. Ross recommended blanket tariffs, blanket quotas or a mix of targeted tariffs and quotas.
If tariffs or quotas are instituted, there is no timeline for when they might be lifted and no provision for them to be removed should they spark inflation, Ross told American Metal Market. “These tariffs or quotas could be canceled at any time that the president chooses. But there is not a specifically scheduled termination date.”
The proposed Section 232 remedies for steel imports would apply equally to semifinished goods and to both finished carbon and stainless products, Ross said. That means everything from blooms, billets and slabs to flat products, long products and pipes and tubes could be targeted.
US mills cheer “We appreciate and agree with the compelling case presented by Secretary Ross,” U.S. Steel said in a statement. “We urge President Trump to take prompt, aggressive and lasting action.”
John Ferriola, chairman, chief executive officer and president of Nucor – the largest mini-mill steelmaker in the United States – said he was “very encouraged” by Ross’ recommendations. “We urge the president to move quickly to review these recommendations, [and] we stand ready to assist the administration in evaluating which recommendations will have the greatest impact in stopping the flow of unfairly traded imports,” he said in a statement.
And the Steel Manufacturers Association – which represents electric-arc furnace steelmakers – also cheered the move. Ross “has laid out options that have the potential to be meaningful and effective to address the threat the industry faces in light of global excess capacity and relentless steel imports,” SMA president Phil Bell said in a statement.
Wall Steel celebrated Ross’ findings, too. Shares of U.S. Steel closed Friday trading at $44.75 each, up a whopping 14.77% from their previous close, while shares of AK Steel closed at $5.96 each, up 13.74% from their previous close. Other American steel companies saw more modest gains – up 4-8%. None was in negative territory.
Foreign mills, traders jeer Mills in Japan, for one, had a very different view of Ross’ recommendations. “The ultimate imposition of this naive regime would be a disaster for American manufacturing and the good, well-paying jobs it supports,” Tadaaki Yamaguchi, chairman of the Japan Steel Information Center, said in an email to American Metal Market.
The American Institute for International Steel (AIIS), which represents steel traders, also warned that draconian measures taken against steel imports could backfire on US exports. The US agricultural sector might face the most risk in any tit-for-tat trade war, AIIS president Richard Chriss told American Metal Market by phone.
Take solar panels, for example. When the US hit China with duties on its solar panel exports, Beijing retaliated against US sorghum exports. “That was a warning shot. … China is ready, willing and able to retaliate against higher value-added agricultural exports,” Chriss said.
The US doesn’t export much sorghum to China. But it does export a substantial amount of soybeans – and tariffs on soybeans could bring pain to US farmers, who also happen to be big steel consumers, he suggested.
The proposed measures could also stall out the US economy “just as it seems to be roaring to life” and are unnecessary given that most US mills are profitable, Chriss said.
It’s also not clear how the process for granting exceptions to duties or tariffs might work, Chris noted. That process was administered poorly when the US imposed Section 201 penalties against foreign steel in the early 2000s under former President George W. Bush.
Now what? In the meantime, some steel buyers are bracing for steep price increases.
“If this level of tariffs goes through, you’ll be talking about price increases in the hundreds of dollars a ton, not $30, $40 or $50,” a domestic tube mill source said.
“Buyers have some big decisions to make because, if this 232 is accepted, there will be a shortage of steel for sure,” a southern distributor said. “Do you fill your warehouse now or wait and see? Prices are already high, so I would expect more momentum while everyone sort of tries to figure out what this new world is going to look like with minimal imports.”
Other industry participants are placing their bets on which remedy the president might choose.
“While all three are positive for both [the steel and aluminium] industries, we think options two and three are the most likely outcomes, as the first option – utilizing a blanket tariff – is too broad, in our view,” Cowen analyst Novid Rassouli wrote in a research note Friday. A blanket tariff could “knock out” imports of certain products while providing little help for others depending on the spread between US and foreign prices, he wrote.
Some even suggested that Ross had not given the president strong-enough measures to counter imports.
Speaking at the National Association of Steel Pipe Distributors annual convention in Houston, MaryEmily Slate, vice president and general manager of Nucor Steel Arkansas, said Trump is likely to hammer imports from nations with overcapacity, government ownership and subsidy programs.
“He’s steadfast in creating a level playing field and punishing these countries that continue to dump steel,” she said. He could go even further, for example, with an outright ban on imports from countries caught repeatedly violating US trade laws, she added.
Trump has until April 11 to decide what to do. “He’ll make his decision when he makes his decision,” Ross said. “As you know, there is quite a lot going on right now.”
Dom Yanchunas, Houston, contributed to this report.