“If we are really trying to protect American jobs, we should exempt slabs. Otherwise, you are only going to move jobs from here to the other side of the United States and increase the price - and I don’t think that’s the goal,” CSI president and chief executive officer Marcelo Botelho Rodrigues said in an exclusive interview with American Metal Market on Wednesday March 7.
The West Coast slab converter employs approximately 1,000 people at its plants, which make both flat-rolled steel and electric-resistance welded pipe.
“I think this is a misunderstanding, a mistake, and I believe it will be fixed in the short term,” Rodrigues said of the blanket tariffs Trump proposed. He noted that CSI has been meeting with Congressional and White House leaders about the 232 for almost a year, and had met with administration officials as recently as last week.
CSI was told it would make sense to exclude slabs from the 25% tariffs, but given no guarantees that they would be.
"Ultimately Mr. Trump will decide this, and it’s very hard to predict what he’s going to do,” Rodrigues said.
In the meantime, the company has about a 1.5-month supply of slabs on the ground. Slabs are not available from domestic mills at the quantity CSI needs to run its operations. "So we don’t have the excess inventory to cope with [Section 232],” he said.
US electric-arc furnace mills typically do not supply slabs. And it takes idled integrated capacity as long as six months to restart, Rodrigues noted.
Even once integrated mills resume operations - US Steel has said it will take four months to restart an idled blast furnace at its Granite City Works in Illinois - it’s not clear that it would make sense for CSI to source from US Midwest mills. That’s because the cost of land freight over the Rocky Mountains is four to five times more than ocean freight from Brazil or Japan, he explained.
So, unless the 232 remedy changes, CSI will probably pay duties on material it sources from its parent companies - Japanese steelmaker JFE Steel Corp and Brazil’s Vale - as well as from third parties such as ArcelorMittal’s mills in Brazil and Mexico, Rodrigues said. And CSI sources more from third parties than from its parents, he noted.
That means CSI will have to pay 25% more for its raw materials than will its mini-mill and integrated competitors, and then will have to pass that cost on to West Coast manufacturers.
There is no tariff on iron ore, scrap or scrap alternatives such as direct-reduced iron.
“We are going to fight with all our all of resources to… correct the direction of this initiative,” Rodrigues said.
For example, the Section 201 tariffs implemented under former President George W. Bush in 2002-03 excluded slabs from tariffs as long as imports didn’t go above a certain threshold. A similar mechanism - with tariffs triggered only above a certain quota - could work again, according to Rodrigues.
Still, CSI's customers will face the greater challenge, he continued.
As a result of the panic surrounding the 232, “their first concern is the availability, the second is the cost,” Rodrigues said. A price spike might be the immediate impact of the 232. But the more lasting impact, if the blanket remedy is not refined, could be a less competitive US manufacturing base.
“Protectionism is not good. You may have wealth for a short period of time. But in the medium to long term, it hurts the overall economy,” he warned.
NLMK USA, another slab converter with operations in Pennsylvania and Indiana, has said the possibility of tariffs on semi-finished goods could jeopardize $600 million its Russian parent company was thinking of investing in its US operations.
California Steel Industries' (CSI's) business model of converting slabs into flat-rolled steel and pipe will be unfairly targeted if President Donald Trump doesn’t exclude slabs from the proposed 25% import tariffs under Section 232.