But they don’t want to see Section 232 watered down more broadly or removed anytime soon, they said.
“We think that high-level talks should continue on this. We also feel that there are mechanisms… that should be strongly considered to replace the tariffs that currently are in place against Mexico and Canada,” Steel Manufacturers Association (SMA) president Philip K Bell said.
Bell made the comments during a press conference at SMA's fall board of directors meeting on Thursday October 25 in Chicago.
“It’s important that we work with our two largest steel trading partners to come up with a way that’s mutually acceptable,” Bell said. “I wish I had a crystal ball and could tell you when that is and exactly what that is - but I don’t.”
Bell declined to say whether the United States might prefer quotas or tariff-rate quotas.
The US imposed Section 232 tariffs of 25% on steel from Canada and Mexico on June 1. Both countries have responded with trade restrictions against US exports.
The American Iron and Steel Institute (AISI), another domestic steel trade association, has said that a resolution to Section 232 tariffs against Canada and Mexico could come by November 30.
Whatever happens on the Section 232 front, the US-Mexico-Canada Agreement (USMCA) - the proposed replacement to the North American Free Trade Agreement - probably won't go fully into effect until “well into” 2019 because of various administrative and legislative hurdles, Bell said.
But a decrease in tension among the US and its North American trading partners has led to a rebound in orders, Steel Dynamics Inc (SDI) president and chief executive officer Mark Millett said.
SDI earlier in the year saw a “near shutdown” of its Mexican order book. “That has flipped totally, and there has been a resurgence of interest from our Mexican customers,” Millett said.
Mexico is a key market for SDI, in particular for its flat-rolled mini-mill in Columbus, Mississippi.
North of the US border, anticipated disruptions in orders from Canadian customers never materialized, Nucor executive vice president David Sumoski said. “We were prepared for a slowdown. And we just haven’t seen that… The demand is there, and the demand is strong," he said.
The steel executives also dismissed concerns about high prices impacting steel-consuming industries.
Caterpillar, for example, might have seen higher steel costs in the third quarter as a result of tariffs. But its sales were also up, Millett noted. “The market fundamentals throughout all sectors are incredibly strong,” he said.
“Estimates about the potential economic impact of Section 232 have been wildly overstated,” Bell said. “What you are seeing is not so much high prices as market-based prices. And I think that we’re looking at a situation here where prices are starting to stabilize.”
As for Section 232 in general, there is no time frame for when US President Donald Trump and his administration might lift one of their signature trade actions. The protections should remain in place to protect the US from the “import surges” the domestic steel industry has seen in recent decades, Bell said.
“What that timeline is, quite frankly, I don’t know,” he said. “One year is unlikely to be long enough... And I also think we should avoid setting any arbitrary time limits.”
US mill capacity utilization rates are near 80% - a key objective of Section 232 - but those levels need to be sustained for a longer period of time. “And keep in mind that 85% is probably a more optimal rate for most steel producers,” Bell added.
Said Millett. “There is no near-term driver to eliminate Section 232.”
There are only two primary steel consuming regions in the world: North America and Europe. Other economies - whether developed such as Japan or emerging such as Vietnam - are export oriented, which means import pressure is unlikely to go away soon.
“There is only so much of a burden that those two communities (North America and Europe) can absorb. So I personally think that there needs to be a longer-term solution - and I think there inevitably will be,” Millett said, characterizing Section 232 as a “stopgap” measure.
Section 232 is likely to remain in place no matter which party wins the US mid-term elections, Bell noted.
“This is increasingly becoming a bipartisan issue with support from both sides of the aisle - so we’re in good shape,” he said.
Bipartisan support also remains for an infrastructure-spending bill. What is less clear is how to pay for it, Bell said.
“I hope that Congress and the [Trump] administration have the political will and courage to do what’s necessary to get a well-funded, long-term package in place,” he said.
In the meantime, most steel-consuming markets appear strong heading in 2019, Sumoski said. And infrastructure spending would brighten that outlook.
But “it feels like the discussion will happen after the election," he said. "There is going to be some delay until shovels go into the ground. So at best you are going to maybe see some of that work at the end of the next year.”
US mini-mill steelmakers would like to see Section 232 tariffs versus Canada and Mexico replaced by another method to limit imports, industry executives said.