How Trump’s proposed steel border wall could impact the US steel market

Monday, 07 January 2019 23:13:24 (GMT+3)   |   San Diego
       

On Sunday, Donald Trump announced he would be asking the heads of US steel mills to provide him with design ideas for a southern-border spanning barrier.

"We've been in touch with a lot of people and I informed my folks to say that we'll build a steel barrier, steel, that it will be made out of steel, that it will be less obtrusive and stronger," Trump said.

Although Congressional approval for such a project seems unlikely, that hasn’t stopped some within the domestic steel industry from questioning how this type of project could impact local markets.

“Obviously a steel wall would be a boon for domestic steel producers and would have a positive effect on pricing,” a source stated, noting that there would likely be positive and negative effects. “Assuming that it would mandate domestically produced steel it would create lead time issues as well.”

Possible impact to the plate market

“If they decide to use steel plate, this is going to shoot lead times out substantially,” a source said. “I imagine that the rest of the US would see their prices go up $5.00-$10.00 cwt. ($110-$220/mt or $100-$200/nt).  By all estimations, if they built 2,000 miles of wall, not including the steel that's needed for the base structure, we could be talking about 800,000 tons of steel plate, which no one mill in the US has capacity to do.”

“Plate prices in the US are already astronomically high compared to the rest of the world,” another source said. “Prices would go through the roof.”

Possible impact to the scrap market

“Scrap pricing would climb, for sure,” another source said. “Domestic demand would increase, by how much is anyone’s guess. But the big question would be whether pricing would rise to the extent that some of the East coast exporters would feel they’d make more money shipping scrap on rail car to the domestic mills as opposed to selling it to Turkey. Or, export prices could rise to the extent that Turkey won’t buy it.”

“The logistics of a steel-slat wall would be a nightmare that will likely cause some supply issues," an East coast source said. "Not to mention the idea that there’s no guarantee that people on the Mexico side of the wall wouldn’t tear down sections of the wall and sell it for scrap."

Possible impact to the steel import market

A separate source commented, “Setting aside the politics and logistics of the item, the large US-Mexican wall infrastructure spending could give the US an opportunity to make friends outside the relevant border by removing import barriers to meet steel demand for its construction. The US cannot meet production requirements for a wall, and steel consuming businesses are already lobbying Congress against further price increases from domestic sources as it negatively affects their competitive position.”

 

 


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