Dec. 7, 2016

The Tradeoffs of Trade Policies and Jobs

Service centers are middlemen. To succeed, they need both a healthy supply base and a healthy customer base. Under the current market conditions, one appears to be gaining an advantage at the expense of the other. Panelists at the Association of Steel Distributors fall conference Nov. 18 in Las Vegas sounded a warning.

Domestic steelmakers continue to test the limits of trade law when it comes to restricting imports. No other industry has filed more antidumping and countervailing duty trade cases than steel. Recent rulings by trade regulators have all but eliminated imports of low-cost Chinese steel into the U.S. And prices have responded with big gains in the fourth quarter. Trade policies under the Trump administration, which numbers among its advisors Dan DiMicco, former head of Nucor Steel, are likely to restrict imports even further as a means of supporting the domestic steel industry and steel jobs.

But there are other jobs to consider, too, pointed out ASD panelist Joe Franczek of Steel Warehouse Co. Trade policies need to be balanced, he said, otherwise more manufacturers may be forced offshore. “We understand well that the unfair trade practices of foreign countries have hurt American mills, but to take a one-sided approach is not good for our industry. Our customers, the OEMs, are under big pressure to lower their costs. We think some will begin moving their production if they believe they can produce their parts more cheaply elsewhere. If our trade policies make American steel pricing too high, we don’t think that’s healthy. We want to make sure it’s somehow kept in balance.”

“The problem is we have customers that are dealing on a global level with a very strong dollar. They are already under a lot of pressure,” said Carlos Borjas of Feralloy Corp. “When they see steel prices in the U.S. that are $100 to $150 per ton over the world price, they say the only way they can keep their products competitive is to source from other parts of the world. We have to protect the market from unfair trade practices, but we have to look at how we can protect the whole supply chain, not just individual industries.”

Using a gambling analogy fitting for Las Vegas, the presidential transition is sort of like a hand of Blackjack. Many steel executives are excited, as if they are sitting with an ace while they wait for the next card to fall. The question is, when it comes to trade, will Trump be a king or a deuce?


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Monday, October 23, 2017