Spurred by new trade tariffs, U.S. steel prices have increased by double-digit percentages this year while foreign steel prices dropped, a trade research firm has found.
A new American Steel Index report by Business Forward Inc. said tariffs increased the prices on American-made, hot and cold-rolled steel 11 percent since February. In contrast, prices on foreign steel fell 4.8 percent on average.
Business Forward, which tracks a host of trade issues including the North American Free Trade Agreement and its pending replacement, began analyzing the effect of trade tariffs in March. It issued its first monthly report in June and now reports results monthly, with its latest report released on Friday.
October’s report said price differences on steel over seven months may have a disproportionate impact on U.S. manufacturers in highly competitive markets and those manufacturers that export their finished goods.
“Those manufacturers are the ones America needs most,” said Business Forward President Jim Doyle.
Many U.S. iron and steel manufacturers and the United Steelworkers support the tariffs for helping slow the illegal dumping of underpriced steel into the United States. Many that buy steel and other raw materials to make products, though, said tariffs have escalated their costs and disrupted their supply chains.
Price variations were more extreme on certain types of steel.
For example the report found prices for U.S.-made, hot-rolled steel jumped 13.5 percent in seven months, while cold-rolled steel rose 8.9 percent. During that same time, prices on steel made in the United Kingdom, Italy, China, Germany and Japan dropped 4.6 to 4.9 percent.
“As a result, U.S. manufacturers are paying 15.8 percent more for hot- and cold-rolled steel, on average,” the report said.
Doyle argued the new tariffs maybe ultimately “putting U.S. steelmakers ahead of manufacturers.” Companies that buy steel, he said, “employ 46 times more workers across the United States than companies that produce steel.”
His concern is that the tariffs could cost jobs.
But the United Steelworkers (USW) union that represents most workers in the steel industry, including those on Minnesota’s Iron Range, pointed out that 12,000 workers in the steel and aluminum industries have been hired or recalled since February, spokesman Tony Montana said.
“I don’t trust anything touted by free-trade lobbyists as ‘proof’ the tariffs aren’t working,” he said. “These jobs in primary metals support five other jobs upstream and downstream in the industrial supply chain as well as in their immediate communities.”
About 2,000 taconite workers lost their jobs on the Iron Range between 2015 and 2017 as a major downturn hit the U.S. steel industry. While several factors led to the slump, a major factor pointed to by the steel industry is a lopsided playing field caused by dumping underpriced steel in the United States.
The new trade taxes, they argue, have helped slow the practice by the Chinese, but also by South Korea, Brazil, Saudi Arabia and India.
Most of the Iron Range operations are running again, and the workers recalled.
So when President Donald Trump pushed through a 25 percent trade tariff on imported steel and a 10 percent tax on imported aluminum in March, U.S. steelmakers and workers generally supported the move, Montana said.
The U.S. trade tariffs — initially suggested for China — have since spread to include goods imported from U.S. allies in Japan, Mexico, Canada and Europe. Retaliatory tariffs emerged, and have since renewed various trade talks with mixed results.
This month, the American Iron and Steel Institute reported the tariffs helped slow steel imports. Americans imported 26.2 million net tons of steel during the first nine months of 2018 — down 12 percent from a year ago.
At the same time, U.S. manufacturers in other industries that rely on imported steel said the tariffs created for them a double whammy.
Metal prices rose and supply-chain problems erupted as metal suppliers either jockeyed to snatch up available supplies or became choosy about which factory customers they would supply. Smaller manufacturers trying to order steel were often put at the bottom of the list.
But even Minnesota’s multinational manufacturers reporting earnings this month said their supply costs have swelled.
Maplewood-based 3M said the new tariffs and retaliatory actions by other nations will jack up raw-material costs by $100 million next year. Outdoor vehicle maker Polaris Industries, based in Medina, said it will pay $40 million more in tariff-related costs this year. NVent Electric PLC, based in England but with operational headquarters in St. Louis Park, said tariffs will hike its steel and aluminum enclosure costs by about $8 million this year.
Trade groups such as the National Association of Manufacturers urged the Trump administration to restore bilateral trade talks with China and other partners to find a new solution.
“With every day that passes without progress on a rules-based, bilateral trade agreement with China, the potential grows for manufacturers and manufacturing workers to get hurt,” said Jay Timmons, the association’s president. “No one wins in a trade war, and manufacturing workers are hopeful the administration’s approach will quickly yield results. Now is the time for talks, not just tariffs.”