Attendees of SteelOrbis’ 11th annual RWR conference at the Planet Hollywood Hotel and Casino were met with a lively discussion, in which Steel Manufacturing Association President Phillip Bell, Stone Steel Corporation (SSC) President Vince Pappas and Associated General Contractor’s Chief Economist Ken Simonson shared their thoughts on federal infrastructure spending, projected demand for longs products, and the continued aftermath of Section 232.
“[As far as federal infrastructure spending goes,] the challenge in terms of getting [an infrastructure spending bill passed] will remain regardless as to which party takes over the US House of Representatives and Senate [after the November election],” Simonson said. “Although some states have raised their funding by raising money from traditional means, such as a state gas tax, in congress, it’s hard to get enough votes to pass a federal gas tax increase.”
Since 2020 is an election year, he continued, there is zero probability that congress will vote to increase those taxes before election day.
“We’re unlikely to see any movement on that until 2021 at the earliest.”
Later in the discussion, the conversation turned to the “mixed results” of the Section 232 tariffs. Conference moderator and SteelOrbis Americas Executive Editor Katie Memmel noted that while some domestic mills opened new facilities, others announced closures. Import decreased, but many manufacturers suffered from higher imported materials costs.
“Phillip, in 2018, US steel producers reported record profits, but earnings plunged in 2019,” Memmel commented. “With no evidence of an overwhelming benefit to the US steel industry, do you foresee the end to Section 232 tariffs at any point?”
The first thing, he said, is that the profitability question needs to be put into perspective.
“2018 was a record year for most steel producers, and for some, it was the best year they’ve ever had in the history of the company. In 2019, even with profits being down, most [mills] still had their second or third best year in their company’s history,” he continued. “Tariffs have a shelf life and you can’t keep them in place forever, but there have been some structural issues that have helped Trump keep them in place.
Examples of those structural issues, he said, included state sponsored capacity expansion, dumping and circumvention.
“After decades of antidumping / countervailing duty cases, the president did something that finally got everyone’s attention,” Bell concluded. “Section 232 is a political winner for Trump. There was a study done at the end of last year, in swing states, to ask if people were upset by downstream effects of Section 232. All of the respondents said that 232 had little or no effect on their business. Do I think [possibly electing a new president in November] would cause an immediate end to 232? No. If Section 232 is removed, the winding down would need to be orderly.”
Not having an orderly winding down of the 25% tariff, he noted, would likely flood the US market with cheaply priced imports.
Toward the end of the panel, Memmel turned to Pappas, to ask whether he would recommend revoking Section 232 tariffs.
“I have three thoughts on that. First, we should keep them going because there is a reason they’re in place; but as a guy who sometimes need to buy cheaper imported steel to strike a competitive balance? I’d say get rid of them,” he said. “Third, I think that Section 232 has helped create a kind of ceiling and floor [for domestic prices], which helps us have a better feel of where [domestic prices] will fluctuate. Now, we have a better feel of where the top and bottom of the market will be based on the current demand structure.”