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Trump Tariffs could Cost as Well as Create U.S. Steel Jobs

These translations are done via Google Translate

March 7, 2018, by Nick Carey

DETROIT (Reuters) – Higher U.S. tariffs on imported steel will mean more jobs at some American steel mills but raise the risk of layoffs at others, industry executives said on Wednesday.

On the winning side of President Donald Trump’s plans to impose a 25 percent tariff on imported steel are U.S. steel mills with excess capacity that can be restarted, albeit with a significant delay, to meet increased demand. On the losing side are steel makers that rely on the import of specialty steel products not manufactured in the United States.

Bob Miller, chief executive officer of the U.S. operations of Novolipetsk Steel PAO, knows exactly how his business and workers will be affected – and it is not good news.

“This will absolutely lead to layoffs,” Miller said, explaining that U.S. producers do not make the steel slabs he needs to supply sheet steel to customers like Caterpillar Inc and automakers.

If Trump’s steel tariffs are imposed without exemptions, Miller says Russia-based Novolipetsk Steel will shelve plans to invest $600 million to add capacity at factories in Pennsylvania and Indiana and lay off hundreds of American steel workers. Within three to four months the company would have to cut 50 percent of the 1,200 steel workers it employs today because it would run out of raw materials, he said, adding that if customers refuse to accept higher prices, the company’s U.S. “business case could disappear.”

“Personally, I think my 1,200 U.S. steel jobs are just as important as anyone else’s 1,200 steel jobs,” Miller said.

But at U.S. Steel Corp the company is readying to ramp up operations in expectations that the tariffs will spur demand. U.S. Steel on Wednesday said it would begin restarting one of two idled blast furnaces at its Granite City, Illinois, steel plant – a process that will take up to four months and could support 500 jobs.

The company is “actively reviewing the anticipated increased demand for steel produced in the United States,” a U.S. Steel spokeswoman said.

The two companies are emblematic of how the proposed tariff on steel has exposed division within the industry and highlighted the challenges of rebuilding capacity in a capital-intensive sector.

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U.S. steel makers have said the domestic industry has 30 million tons of annual idled capacity and can ramp up to meet demand – which totaled around 107 million tons in 2017, 36 million of which was imported.

Granite City and an AK Steel Holding Corp mill in Ashland, Kentucky, are the only two idle U.S. plants sufficiently well maintained to be brought back any time soon, industry analysts said. Between them, they have 5.3 million tons of capacity available.

For many other mothballed mills, “it is highly unlikely they would come back at all” because it would be too expensive to do so, said Clarksons Platou Securities analyst Lee McMillan. “We would likely see higher prices because of capacity constraints.”

U.S. steel makers are expected to increase prices if tariffs are imposed.

Independent analyst Michelle Applebaum said the U.S. steel industry should be able meet most demand, but even plants like Granite City and Ashland, which have been kept ready to restart, take four to six months to be ready for production.

“This doesn’t happen overnight,” she said.

 This worries steel consumers like energy storage and transport company Plains All American Pipeline, where CEO Greg Armstrong said shortages could hamstring some pipeline projects.

“We buy not only pipe but valves and things that are not manufactured in the United States,” Armstrong said. “I don’t think it’s appropriate to put a tariff on something that you can’t buy in the United States.”

Steel suppliers like California Steel Industries Inc, which imports 1.5 million tons of steel slabs annually, argue that Trump’s bid to save U.S. steel jobs will cost them.

Reporting by Nick Carey; Additional reporting by David Gaffen; Editing by Leslie Adler

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