SDI concerned with potential Brazil pig iron tariffs

SDI monitoring Brazil tariff issue

President and COO Barry Schneider said it is a situation SDI is watching closely.

“Historically, the United States government has not looked at raw materials as something that would be tariffed going way back to the founding of our country,” he said in an earnings conference call on Tuesday.

He noted that Section 201, 301, and the 232 tariffs previously did not apply to pig iron coming into the US.

However, he said SDI’s long products mills do not use any iron substitutes or pig iron, so “this is a flat-rolled issue.”

SDI has three flat-rolled producing plants. Its Butler, Ind., operation has an iron-producing facility, which uses waste oxides and recycled iron content to generate pig iron.

“So the Butler mill is largely independent of the merchant trade,” Schneider said.

SDI also has other flat-rolled facilities in Columbus, Miss., and Sinton, Texas.

In general, Schneider labeled this tariff “concerning.”

“We maintain a supply chain that has been under quite a bit of duress in the past five years,” he said.

He pointed out that, historically, Russia and Ukraine produced pig iron. And since Russia invaded Ukraine in 2022, “those materials have been severely reduced.”

Schneider said:

“We still maintain a relationship with Ukrainian producers. To the extent that they can supply, we’re happy to buy from them. But we have shifted a lot of our production to Brazil. So as we look at the tariff landscape, we balance our metallic spreads.”

With this shifting landscape, Schneider said SDI’s aims to get more value out of the scrap supply chain.

“It’s one of the powerful benefits of having Omni(Source) as a captive scrap supplier to us,” he said. “We can bring in the highest quality materials and continuously balance based on cost, productivity, and quality. So, we’ll manage, as we always do.”

Still, Schneider offered the hope that the US government could work something out on raw materials.

“There are alternatives we can explore, and we’ll continue to work with the government,” he said.

Schneider added: “And hope that there is some kind of relief when it comes to raw materials and the tariff strategy.”

The specifics are always changing based on the various cost inputs, he said. The company looks at it “as a challenge for us to thrive in.”

Millett talks big picture

Chairman and CEO Mark Millett was asked about the durability of Section 232 tariffs and how they compare to the 2018 S232 tariffs from Trump 1.0. Millett said there was no doubt the situation was fluid and would change.

“But we do believe that tariffs will be a mainstay of the trade agreements going forward,” he said on the call.

He called the progression from NAFTA to the USMCA in the first Trump administration an “incredible advance on the relationship between Canada, Mexico, and ourselves.”

Millett believes the agreement has helped North America as a whole.

“The USMCA is up for renegotiation again in 2026,” Millett said. “And it’s our belief that the tariff discussions and the trade policy discussions that have gone on between the three countries are a prelude to that.”

He thinks the renegotiated solution will help in preventing “the leakage of Chinese and Asian and other trading through Canada and coming through Mexico into the States.”

Millett concluded: “I think it’s all going to lead to a much better trade environment going forward for the long term.”