Final Thoughts
Final Thoughts
Written by John Packard
November 8, 2020
My “final thoughts” provide me an opportunity to give my opinions on a wide range of topics. Some are directly steel related and some are not.
The question we are all asking ourselves today is what will a Biden administration mean for business? Here are some thoughts I picked up from my reading over the weekend:
Biden is unlikely to roll back tariffs on imported steel, aluminum, Chinese and European goods any time soon.
In a Reuters article dated Nov. 7, Nasim Fussell, former Republican trade counsel for the U.S. Senate Finance Committee said, “’I’ve been told if you close your eyes, you might not be able to tell the difference between the Biden and Trump trade agendas.”
Biden has made many comments about his support of the domestic steel industry and a key part of his agenda is the “Buy American” plan for all government purchases. This means the “melted and poured” designation for what is made in America will most likely continue.
Biden said about government contracts, ““The president of the United States awards over $600 billion in contracts a year for our military, for all the things we build, federal buildings,” he said during a late campaign rally. “Well, it’s not a violation of any trade law. No one’s done it, but I promise you I’m going to do it. Not a single — not a single solitary contract will be awarded unless all the products used by that contractor are made in America. All of them. Right here in America.”
The pressure on China will continue, and you can expect Biden will end “artificial trade wars” with Europe, and instead consult with U.S. allies about how to deal with China and Chinese goods. Look for Biden to try to leverage our allies against China.
According to Reuters, “Former Trump and Obama administration trade officials say that in order to roll back tariffs on Chinese goods, Biden would likely demand the same basic concessions from China that Trump did: curbing massive subsidies to state-controlled firms, ending policies that force U.S. companies to transfer technology to Chinese counterparts, and opening its digital services markets to U.S. tech firms (another big Biden donor constituency).”
Biden will push for a large infrastructure bill. Whether it has a chance of passing will depend on who controls the Senate. That will not be known until after the Georgia special election, but the early money is that the Republicans will retain their majority.
Biden will rejoin the World Health Organization (but I expect there will be pressure applied for changes) and he will rejoin the Paris Climate Accords. He will push for more wind and solar production in the United States (both are steel-intensive projects). Do not look for him to end fracking or any other oil or natural gas projects during the short term.
As Ryan Smith of CRU pointed out during his presentation at the 2020 SMU Steel Summit Conference, if the U.S. embraces moving toward carbon neutrality, the U.S. mills are well positioned within the world steel community. We will have more about this over the next few months, as I think it is important for Americans to realize how good our steel industry is compared to the rest of the world.
Time will tell if NLMK USA, California Steel, JSW USA and other re-rollers located in the United States will get relief from the Section 232 tariffs on slabs. My gut feel is don’t expect any quick decisions reversing what is already in place.
With Biden’s focus on controlling the pandemic and getting his cabinet confirmed by the Senate, one can expect trade and steel issues may be on the back burner for a period of time.
Interesting note: I saw an article in the Valley Star in Texas that the expansion of the Ternium steel mill in Nuevo Leon, Mexico, will have a big impact on the Port of Brownsville in Texas. The expansion means more steel production at the mill, which will be fed by slabs coming from Brazil. Those slabs are run through the Port of Brownsville. The most slab run through the Port of Brownsville in the past was about 3 million metric tons (3.3 million net tons). That is expected to grow to 4.5 to 5.0 million metric tons (4.9 to 5.5 million net tons). The slabs are moved to Mexico via rail using the Brownsville & Rio Grande International Railway.
We will begin our next SMU flat rolled and plate steel market trends analysis at 8 a.m. ET on Monday morning. Do you expect further price increases from the domestic steel mills? Will a Biden administration hurt or help the domestic steel industry? Is there a chance we could see a shortage of steel in the coming months? How do you feel about your company’s ability to be successful in the current market conditions (and then again 3-6 months into the future). Check your inbox at 8 a.m. ET (or your SPAM folder). If you are not on our invitation list and you would like to be, please send a request to info@SteelMarketUpdate.com
Our next Steel 101: Introduction to Steel Making & Market Fundamentals Workshop will be held virtually on Dec. 8-9. Come join the Steel 101 instructors: Mario Briccetti, Roger Walburn, Chuck McDaniels and myself as we discuss how steel is made, rolled, sold and used, and what are some of the key issues affecting supply, demand and ultimately steel prices. You can learn more about our agenda, costs to attend and how to register by clicking here. Here is what one of our recent attendees had to say about our first virtual workshop, “It was a pleasure attending the workshop. The information that I needed to learn was wrapped up in a single package. The workshop and the trainers were great. Just what I needed to be successful.” – Brian K. Bohm, Regional Plant Manager, Morton
As always, your business is truly appreciated by all of us here at Steel Market Update.
John Packard, President & CEO
John Packard
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