Foreign steelmakers still have a significant share of the steel market despite U.S. steel tariffs. According to the Wall Street Journal, the U.S. is still largely dependent on foreign-made steel despite the 25% tariffs placed on foreign steel since March 2018.
Domestic steel producers have raised steel prices rather than isolating imported steel as the most expensive on the market. This has generated higher profits for U.S. steelmakers but has also driven up costs for U.S. manufacturers.
The world produced up to 1.69 billion tonnes of crude steel in 2017 alone and the U.S. remains the world’s largest market for imported steel.
“[The tariffs] made the existing companies more profitable, but there hasn’t been fundamental change yet,” said Kirk Murray, vice president of SeAH Steel America.
Some domestic steelmakers such as Steel Dynamics and Nucor Corp intend to use their new revenue to expand and build new plants. However, experts say that new capacity could put too much pressure on older U.S. steel mills that are expensive to operate.
Foreign steel makes up over a fifth of the U.S. steel supply and U.S. steelmakers aren’t able to produce enough to meet the domestic demand. Because of this, although the tariffs have given U.S. steelmakers a boost, the tariffs have also made steel more expensive in the U.S. compared to other countries.
In the past year, the price for hot-rolled coiled sheet steel has increased by 22%, coming in at $760 per ton. That’s 70% higher than the average price of sheet steel in other countries.
As a result, selling steel in the U.S. has become more appealing to European and Asian steelmakers even with the additional tariff costs.
“Pushing the price up has just encouraged the imports to come in,” said Locker Associates president Mike Locker.
Bill Douglass, the regional president of Chicago-based steel processor and distributor Lex Group, agrees. Lex Group has continued to sell steel from Vietnam, Germany, and other countries who are paying the 25% tariff.
“The foreign mills can pay the tariff now and still make money,” said Douglass.
For U.S. manufacturers that rely on foreign steel to maintain the price of their products, the news that steel imports are still significant may feel like a small miracle. Since the tariff was first announced, domestic manufacturers have worried about sales and have struggled with U.S. steelmakers over tariff relief.
Approximately 50% of the world’s steel is used for building and infrastructure whereas 13% is used by the automotive industry. With winter on the way and snowmobiles selling 118,657 times worldwide in 2017 alone, it makes sense for industries to be nervous at this time of year when product manufacturing is crucial.
According to the American Iron and Steel Institute trade group and the U.S. Commerce Department, up to two million tons of finished steel were imported into the U.S. in October, a 7% increase since September. However, that’s still a 13% decrease since October 2017.
In contrast, domestic steel production has jumped by 5% since last year. Up to 8 million tons of steel were produced every month between April and September 2018, which is the most the U.S. has produced since 2014.
Industry analysts say that although these numbers are good, steel companies are at risk of adding capacity dependent on steel prices staying at their current high levels.
This could potentially be a serious issue what with manufacturing activity in the U.S. slowing down. Paired with falling oil prices and the rollback of the 25% tariff on foreign steel, the steel industry may soon see its next slump.