Steel Mills

Tariffs to Blame for Bayou Steel's Demise?

Written by Sandy Williams

Steel Market Update reported in the last issue on the sudden closing of Bayou Seel in Louisiana, and a few readers took issue with some comments in the article (Trade War Contributes to Bayou Steel’s Demise). In statements that were widely reported, Gov. John Bel Edwards blamed the closure on the Trump administration tariffs.

The Governor’s statement from his website follows:

Gov. Edwards’ Statement on the Closure of Bayou Steel Group in LaPlace

September 30, 2019

“The Louisiana Workforce Commission is working with the company, the parish president and elected officials to assist those employees who are directly impacted by today’s news,” said Gov. Edwards. “While Bayou Steel has not given any specific reason for the closure, we know that this company, which uses recycled scrap metal that is largely imported, is particularly vulnerable to tariffs. Louisiana is among the most dependent states on tariffed metals, which is why we continue to be hopeful for a speedy resolution to the uncertainty of the future of tariffs. Meanwhile, we will do everything within our power to help those displaced workers.”

In July 2018, Gov. Edwards wrote President Donald Trump expressing his concerns about the impact of tariffs on the competitiveness of Louisiana ports, Liquefied Natural Gas facilities, agriculture producers and other industries that sustain communities across the state. Click here to read the letter.

Our readers had a different take on why Bayou Steel may have closed:

“Not that I would ever throw my second favorite state’s governor under the bus, but his comment is just ill-informed propaganda that he was fed by somebody with an agenda.

The mill has a meltshop.

That melt shop uses scrap. A combination of heavy melt and shred.

There is plenty of that stuff here in the U.S. for a U.S. melt shop to use. There is so much, in fact, that it gets exported.

And here is the kicker – there is no tariff on inbound scrap. 

So the blame goes to non-existent tariffs on a good that is readily available domestically for a company that makes products that are not imported as much as in the past because those end products actually have tariffs???

Plain and simple, this company was done in by high costs, old inefficient mills, and Nucor, et al. Beaten by industry evolution. Not beaten by tariffs. There was probably a reason ArcelorMittal sold these plants off a few years ago…”

Another reader also noted that Bayou Steel has its own scrap yards and that blaming the company’s trouble on tariffs just didn’t make sense:

“I was stunned at the Bayou headline and article and felt compelled to make an off-the-record comment.

Bayou has their own scrap yard. Bayou is on the Mississippi, great for scrap in and product out. They are not a great modern mill. Their bankers woke up and said, good grief, they are out of cash and will never make good on a loan. Bayou folks made no excuse. Yet a Democrat governor gets to blame the tariffs for no apparent reason and it gets the headline and zero comment when embedded in text. 

Now, maybe Bayou bought all of its raw material for both the scrap yard and mill from offshore and it was all tariffed. If yes, that would make a great statement in the article.” 

Bayout Steel has filed Chapter 11 bankruptcy noting high levels of debt and a loan default. The company has offered no further explanation beyond a letter to the parish and Louisiana Workforce Commission stating that it was closing due to “unforeseen circumstances and the inability to secure necessary capital.” The closure put 376 stunned employees out of work.

Philip Bell, president of the Steel Manufacturers Association, had the following comment for Arkansas Online:

“I think it’s important to know that tariffs are helping domestic steel producers. Bayou Steel’s closing is the result of there still being a glut of unfair and often illegal steel trade. I think the tariffs helped sustain Bayou, not hurt it. You have to operate safely, efficiently and sustainably everywhere in the U.S. to be competitive and when you look at Bayou’s statement, they had operational challenges they couldn’t surmount.”

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