Steel Products
Leibowitz: Work Globally to Cut Overproduction or Undercut U.S. Manufacturing
Written by Tim Triplett
July 11, 2017
Editor’s note: The opinions expressed here are those of trade attorney Lewis Leibowitz and do not necessarily reflect those of Steel Market Update. There will be more discussion about trade, trade suits and Section 232 in our upcoming SMU Steel Summit Conference, which will include presentations by Leibowitz and others on both sides of the trade debate.
Steel is in the forefront of foreign and economic policy once again. The country awaits a decision from the president about restricting steel imports into the United States to protect domestic steel producers. The decision, expected before now, has been delayed in part at least because of controversy within the administration about whether import restrictions would do more harm than good.
Former Governor and Secretary of Homeland Security Tom Ridge recently wrote an opinion piece that called on the president to support import barriers on foreign steel. The reason Governor Ridge’s advice is very bad is inherent in what Governor Ridge did not mention—the impact of steel import restrictions on millions of American consumers and workers. Higher steel prices will mean that American manufacturers who use steel will become less competitive.
While Governor Ridge mentioned only China and Russia as sources of the U.S. industry’s difficulties, the steel industry plainly wants import restrictions on nearly all foreign sources. Their goal is to increase prices in the United States for steel. That will necessarily make products containing steel more expensive. Inevitably, demand for steel in the U.S. will fall, leading to agitation for restrictions on imports of steel-containing products, as well. Protectionism breeds protectionism.
None of these developments will enhance U.S. security. Steel is only relevant to national security because of what steel users make from it. The ships and armored vehicles needed by the military are not made by steel mills, but by downstream manufacturers. And, far more U.S. jobs will be negatively affected by increased steel costs than even losing U.S. steel manufacturing altogether.
Clearly, steel (and aluminum) are in difficulty because of global overproduction. China is at the center of this problem due to its fantastic expansion of Chinese production of these products over the last 15 years. Bringing steel demand and supply into balance requires global, not unilateral, action. Import restrictions would cut supply in the United States and raise domestic prices. Without cutting global production, these price increases will not only be temporary but destructive of U.S. industry. A global steel conference must handle these issues. Just this past weekend, the G20 group of industrialized nations gave a renewed boost to global efforts to cut production.
The domestic steel industry argues that U.S. import restrictions will cause China to get serious about production cuts. This assertion is unsupported and illogical. If the U.S. goes it alone, the prospects for meaningful cuts in global capacity will certainly lessen and possibly die altogether. China has already been relegated to a minor market presence in the U.S. Import restrictions will not penalize China, but friends and allies like Canada, Mexico, Japan and Germany. Global cooperation in solving this global problem will evaporate as U.S. trading partners challenge U.S. import restrictions rather than working together to solve this global problem.
The Trump administration needs to choose effective action to address global overproduction over short-term and unsustainable protectionism.
Tim Triplett
Read more from Tim TriplettLatest in Steel Products
Rig counts move lower again in US, Canada
Oil and gas drilling activity in North America slowed this week, according to the latest figures from Baker Hughes.
SMU market survey results now available
The latest SMU market survey results are now available on our website to all premium members. After logging in at steelmarketupdate.com, visit the pricing and analysis tab and look under the “survey results” section for “latest survey results.” Historical survey results are also available under that selection. If you need help accessing the survey results, or if […]
Bull Moose Tube CEO Tom Modrowski passes away; Krupinski named interim chief
Bull Moose Tube (BMT) CEO Tom Modrowski passed away suddenly and unexpectedly on March 18. BMT said current CFO John Krupinski has been named interim CFO and CEO.
Rig count pulls back in US and in Canada
North American rig count activity declined this week, according to the latest data from Baker Hughes. The number of active rigs in the US eased from last week’s 6-month high, while Canadian activity continued to wind down.
CRU outlook: Steel prices likely to hit the bottom soon
APAC steel prices are likely to bottom out in the near term as seasonally higher demand coupled with production cuts may support prices. In the EU, prices are likely to remain under pressure, while fresh price increases are expected in the US. APAC steel prices are likely to bottom out in the near term In […]