U.S. Steel Tariffs Create a Double-Edged Sword
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Published on June 01,2016 09:42 AM Steel
American producers capitalize on tighter supplies and higher prices, but costs rise for manufacturers
U.S. Steel Tariffs Create a Double-Edged Sword

PITTSBURGH(WSJ)—New tariffs on imports are boosting steel prices in the U.S., offering a lifeline to beleaguered American steelmakers but raising costs for manufacturers of goods ranging from oil pipes to factory equipment to cars.

U.S. steel producers who lost billions of dollars last year amid a flood of cheap imports are looking to capitalize on tighter supplies and higher pricing. That is shifting the dynamics of a supply chain that had come to rely on inexpensive foreign steel.

“Our government has done a pretty good job of boxing out the guys who were importing the most-cheap steel,” says Stuart Barnett, owner of Chicago-based Barsteel Corp., a steel processor and distributor that sells to a range of manufacturers. “But now the greatest fear we have is that China keeps the cheap steel for itself and makes products that undercut other industries.”

Duties on steel products from China, Brazil, India, Japan and other countries have contributed to the U.S. benchmark hot-rolled coil index rising more than 60% this year to $615 per ton, after falling 33% last year. In Europe, the benchmark index is up by 34%.

Steel imports into the U.S. during the first quarter of 2016 fell to eight million metric tons, down 29% from a year earlier, and inventories also declined.

This spring, major U.S. producers sent out a flurry of letters announcing nonnegotiable increases in prices. On April 15, for example, U.S. Steel Corp. wrote to its customers that “effective immediately, base pricing for all new flat-rolled product sport orders is increased by $60 per ton.”

The rise in U.S. prices follows the Commerce Department’s move to impose tariffs in response to an oversupply in the steel industry, especially from China. Some duties are as high as 266%.

Those tariffs, which come during an election season rife with promises to protect American workers, have given U.S. steel mills more pricing power and have curtailed imports of some steel products that are made more cheaply abroad. Some of those products may not even be made in the U.S.

Courtesy : WSJ

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