SteelOrbis today hosted its 12th annual Rebar and Wire Rod Conference, held virtually in conjunction with the World of Concrete Expo in Las Vegas, featuring a range of topics concerning the US rebar and wire rod markets.
One of the chief concerns continues to be Section 232 tariffs, especially on their impact during the pandemic recovery. Despite the fact that the tariffs have been in place for three years, the debate as to whether they should remain in place is lively as ever.
Finished steel prices have surged in the past year, noted SteelOrbis Content Manager Katie Memmel during her opening remarks, who proceeded to ask panelists whether the tariffs have contributed to higher steel prices.
“A lot of that is due to supply constraints,” said Independent Steel Alliance Executive Director Chris Casey, adding that while sheet prices have more than tripled, longs products are also up, but by a lesser margin. “Would prices have risen as high as they as they have without Section 232? Absolutely not.”
Steel Manufacturer’s Association President Philip Bell disagreed slightly, opining that higher prices have been driven by pent-up demand, higher scrap prices, and the nation’s resilient economy.
“When you factor in higher-than-normal demand with higher scrap prices, the higher prices make sense,” he said.
Memmel then went onto reference a recent letter sent by steel industry groups and the USW to US President Joe Biden, which said that eliminating the steel tariffs would undermine the viability of the domestic steel industry.
“Some want to eliminate the tariffs to increase steel supply, which would address some of the current steel shortages, because imports have historically been a way to keep steel prices in check,” Memmel commented. “With US producers running at 80%, what’s the argument to keep the tariffs?”
Bell said that the first thing that needs to be looked at is the domestic capacity utilization rate, which “needs to be over 80% for a sustained period of time. He also pointed to a recent study by the McKinsey Group found that the optimal rate is closer to 85%, and last week, the capacity utilization rate just reached 81.5% for the first time since the start of the pandemic. “The tariffs have created a level plying field,” he said.
Casey disagreed, adding that since the tariffs have been in place for a long time he doesn’t understand why we’re not already at a higher capacity utilization rate.
“When Section 232 was announced we were told that prices wouldn’t go up,” he said “But it seems that the producers are getting a huge benefit out of 232, but consumers of steel are getting the brunt of it. To what extent has the industry become dependent on tariffs? Have tariffs become the opioids of the steel industry?”
Casey further pointed out that higher steel prices and supply constraints are harming independent fabricators.
“What I’m hearing is that there’s a big problem with the availability of steel. There’s not a lot of steel available and that’s the reality. If there were plenty of steel available we wouldn’t see these prices,” Casey said. “Rising prices are also having an impact on fabricators, because when these fabricators buy from the mill they’re being told they’ll get the price when they see their invoice. They’re also challenged on the supply side, because they not only need to guarantee a price to their customers, they need to guarantee supply. There are companies out there who are choosing not to bid [on a project] or who are walking away from bids because they don’t know if they’ll have the steel available to them. The mill-owned fabrication shops have all the steel they need, and it feels like the independents are getting whatever is left over. It’s a challenging and difficult market for independents right now.”
Casey and Bell both agreed that US steel prices will see a correction at some point, and an online poll offered to attendees suggested high steel prices might be here to stay for a while: only 5 percent of respondents said prices will decline in Q3, while 60 percent said prices would decline in 2022.