During a debate on how the US steel industry will move forward in 2021 held on the second day of the 15th SteelOrbis "New Horizons in Steel Markets" annual conference being held virtually on December 1-3, Philip Bell, president of the US-based Steel Manufacturers Association, and trade lawyer Matthew Nolan, partner at Arent Fox LLP, discussed the long-awaited infrastructure program in the US, economic stimuli, possible changes in trade strategy under the Biden administration, energy policies, and mergers and acquisitions in the US steel industry.
Regarding the much-needed infrastructure bill, Philip Bell said that he is actually optimistic about a well-funded long-term infrastructure program, pointing out that every $100 billion infrastructure investment creates 5 million mt of steel demand. Matthew Nolan agreed that infrastructure is going to be a priority for the Biden administration and stated that the infrastructure program will focus on highways, climate change issues, and a good portion of it will go to rebuilding schools.
Commenting on trade strategies, namely, Section 232, and how or if they are likely to change under the new administration, Mr. Nolan pointed out that he does not believe the tariffs have been successful so far, adding that they may have benefitted basic steel manufacturing but downstream users have been compromised in terms of international competition. According to Bell, one of the goals achieved by the Section 232 tariffs were higher capacity utilization rates which rose above 80 percent. He also explained that, with the USMCA and the exemptions granted to some countries, only 20 percent of all steel imports are currently subject to measures. Regarding the future of the trade measures, Bell said that the existing trade policy is not expected to change in the short term, with the top priority being Covid-19 and the long-term infrastructure program, while Nolan agreed that any possible changes in trade strategies will only come after about six months into the new administration and he added that the trade policy of the Biden administration will be more balanced compared to the steel-centered focus of the current one.
As regards the effects of recent capacity expansions and of the restarting of some idled mills in the US on steel supply in the market, Nolan stated that the increase in capacity will displace imports, while Bell said that it will help normalize prices in 2021, which would not be a bad thing. With the rules of origin under the USMCA, he stressed that more steel should be domestically sourced and this will force companies to look at their portfolios and make the necessary adjustments.
Responding to a question about what kind of energy policies are most beneficial for the steel pipe sector, Nolan pointed out that the energy industry has been having difficulties for the past several years and, on top of oil prices collapsing, the tariffs on steel pipes make it harder for the energy industry to get the material they need for their equipment.
Commenting on the construction industry, a bright spot during the pandemic, Bell said that the reason the construction industry performed better than other industries during the pandemic is that most of the projects were already approved and funded back in 2019, while Nolan agreed and said he is more concerned about 2021, fearing that projects will be reduced in the new investment cycle.