Donald Trump's Bid to Stem Steel Imports Faces Hurdles
April 20 2017 - 3:11PM
Dow Jones News
By Bob Tita
President Donald Trump's bid to stanch imports flowing into the
U.S. steel market is fighting strong currents: Domestic prices that
are among the world's highest and a buoyant dollar that pushes down
the cost of imports.
High labor costs have long pushed up the price of U.S. steel.
Domestic producers increased prices further last year after new
tariffs helped trim the share of imports in the U.S. steel market
in 2016 for the first time in three years. Washington imposed those
duties, up to 500%, on some steel products from competitors in
China and other countries after U.S. steelmakers complained they
were benefiting from unfair government subsidies and selling steel
in the U.S. for less than it cost to make
Meantime, the U.S. dollar's recent strength has made imported
steel a bargain for domestic manufacturers and construction
companies.
Wider duties on imports could encourage U.S. producers to
further drive up their prices, complicating another of Mr. Trump's
campaign pledges: to support U.S. manufacturers.
"For every steelworker, there are 60 workers in steel-using
industries," said Lewis Leibowitz, a Washington attorney who has
worked on trade cases involving steel in the past. "You need
competitive steel prices for those industries to be competitive and
to export."
The Trump administration on Thursday authorized a special
investigation under the little-used 1962 Trade Expansion Act to
consider emergency trade sanctions against foreign steelmakers on
"national security" grounds.
Following a memo-signing event at the White House, John
Ferriola, chief executive of the Nucor Corp., said he hoped the
investigation would result in a "level playing field" for the U.S.
steel industry. Asked whether he believed the U.S. industry could
operate at 100% capacity -- it is currently operating at 71%,
Commerce Secretary Wilbur Ross said earlier Thursday -- Mr.
Ferriola said: "We can come very close to 100%. Give us a chance to
show you what we can do."
Asked whether that would drive up consumer prices, Mr. Ferriola
said: "It would make sure that we get a fair price for our
product."
"A strong steel industry is at the foundation of America's
economic and national security," U.S. Steel Corp. said Thursday,
welcoming the administration's effort. "For too long, China and
other nations have been conducting economic warfare against the
American steel industry."
Investors reacted positively to the news. Nucor's shares were up
3.4% in midday trading, while shares for U.S. Steel and AK Steel
Holding Corp. were up more than 7%.
The administration faces a tough road to argue, as the act
dictates, that U.S. national defense is being undermined by steel
imports, said Mr. Leibotwtz. "A tiny percentage of steel is used
for military purposes, " he said.
Keeping track of steel prices can be more complicated than
watching the value of commodities such as iron ore or oil because
of the wide variety of steel produced for specific uses. Some types
of specialized steel aren't made in the U.S.
And even within the U.S. steel industry, many of the biggest
producers are global companies with sprawling operations that could
be affected by new trade sanctions. ArcelorMittal SA, which is
headquartered in Luxembourg, is one of the largest producers of
steel in the U.S. but supplies some of its mills in the U.S. with
partially finished products imported from its mills in Mexico or
Brazil.
"Steel is a global industry," said Adam Green, an analyst for
market consultant World Steel Dynamics. "There are a lot of
relationships between US steel companies and steel makers around
the world."
(END) Dow Jones Newswires
April 20, 2017 15:56 ET (19:56 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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