• Advertise
  • Contact Us
  • About Us
  • Supplier Directory
  • Login
  • Subscribe
  • Logout
  • My Profile

  • CORONAVIRUS
  • LOGISTICS
    • Air Cargo
    • All Logistics
    • Express/Small Shipments
    • Facility Location Planning
    • Freight Forwarding/Customs Brokerage
    • Global Gateways
    • Global Logistics
    • Last Mile Delivery
    • Logistics Outsourcing
    • LTL/Truckload Services
    • Ocean Transportation
    • Rail & Intermodal
    • Reverse Logistics
    • Service Parts Management
    • Transportation & Distribution
  • TECHNOLOGY
    • All Technology
    • Artificial Intelligence
    • Cloud & On-Demand Systems
    • Data Management
    • ERP & Enterprise Systems
    • Forecasting & Demand Planning
    • Global Trade Management
    • Inventory Planning/ Optimization
    • Product Lifecycle Management
    • Sales & Operations Planning
    • SC Finance & Revenue Management
    • SC Planning & Optimization
    • Sourcing/Procurement/SRM
    • Supply Chain Visibility
    • Transportation Management
  • GENERAL SCM
    • Business Strategy Alignment
    • Education & Professional Development
    • Global Supply Chain Management
    • Global Trade & Economics
    • HR & Labor Management
    • Quality & Metrics
    • Regulation & Compliance
    • SC Security & Risk Mgmt
    • Sustainability & Corporate Social Responsibility
  • WAREHOUSING
    • All Warehouse Services
    • Conveyors & Sortation
    • Lift Trucks & AGVs
    • Order Fulfillment
    • Packaging
    • RFID, Barcode, Mobility & Voice
    • Robotics
    • Warehouse Management Systems
  • INDUSTRIES
    • Aerospace & Defense
    • Apparel
    • Automotive
    • Chemicals & Energy
    • Consumer Packaged Goods
    • E-Commerce/Omni-Channel
    • Food & Beverage
    • Healthcare
    • High-Tech/Electronics
    • Industrial Manufacturing
    • Pharmaceutical/Biotech
    • Retail
  • REGIONS
    • Asia Pacific
    • Canada
    • China
    • Europe
    • Latin America
    • Middle East/Africa
    • North America
  • THINK TANK
  • PODCASTS
  • VIDEOS
  • WHITEPAPERS
Home » The Trump Tariff Twist That's Cost U.S. Steel $5.5 Billion

The Trump Tariff Twist That's Cost U.S. Steel $5.5 Billion

The Trump Tariff Twist That's Cost U.S. Steel $5.5 Billion
July 8, 2019
Bloomberg

President Donald Trump’s tariffs on foreign steel have sped the decline of some of the U.S. mills he vowed to help.

Exuberance over the levies dramatically boosted U.S. output just as the global economy was cooling, undercutting demand. That dropped prices, creating a stark divide between companies like Nucor Corp., that use cheaper-to-run electric-arc furnaces to recycle scrap into steel products, and those including U.S. Steel Corp., with more costly legacy blast furnaces.

Since Trump announced the tariffs 16 months ago, U.S. Steel has lost almost 70 percent of its market value, or $5.5bn, and idled two American furnaces in mid-June that couldn’t be run profitably at the lowest prices since 2016. Meanwhile, Nucor, down around 20 percent, has touted $2.5bn in expansion projects.

The president’s actions likely “sped up” up an unavoidable “evolution,” said Nucor Chief Executive Officer John Ferriola in an interview last month. “Are some companies are going to suffer? Absolutely. We’ll we see some capacity go away, I’m sure of it."

Last July, Trump stood on a makeshift stage at a U.S. Steel mill in Granite City, Illinois, and beamed as workers cheered the tariffs. At that point, the company had already restarted one of two blast furnaces at Granite City, and vowed the second would soon be brought online.

“Workers are back on the job, and we’re once again pouring new American steel into the spine of our country,” Trump said during the hour-long program. “U.S. Steel is back.”

Since then, though, there’s been a somewhat different outcome.

With the stronger steelmakers aggressively boosting capacity to grab market share, a dip in demand has left older, more costly blast furnaces at U.S. Steel and AK Steel Holding Corp. struggling to compete, even with foreign steel nudged out of the equation.

“Be careful what you wish for,” said Timna Tanners, an analyst at Bank of America who has dubbed the industry’s push to add capacity without enough demand “Steelmageddon.” She called it “ironic” that the tariffs are “punishing some steel companies.”

A spokeswoman at U.S. Steel declined to comment while AK Steel said its products have little overlap with EAFs, and that the additional capacity will further pressure imports.

As expected, the tariffs reduced steel imports, creating more demand in 2018 and boosting profits. With that cash in hand, added money from Trump’s corporate tax cut and confidence that protectionism is here to stay, domestic producers began adding more capacity than they would have otherwise.

The problem: This year, with the global economy cooling, demand — and prices — have fallen. That’s given an added incentive to EAF companies with superior profit margins and balance sheets to aggressively grab a bigger share of the market.

“Not all plants are the same,” said Mark Millett, CEO of Steel Dynamics Inc., who in November announced a new $1.8bn EAF mill to be built in the U.S. southwest. “Not all projects are the same.”

Suppliers to blast furnaces are sounding the alarm. In laying out his vision for iron-ore miner Cleveland-Cliffs Inc. at a recent conference, CEO Lourenco Goncalves painted a bleak future for what makes up the overwhelming majority of his current customers.

That’s why Cliffs is investing $830m in a Toledo, Ohio-based plant that will produce hot briquetted iron for electronic-arc furnaces run by firms such as Nucor, Goncalves said. They invested in the plant because “we were able to see the future of steelmaking in the United States,” Goncalves said in New York last month.

Many “blast furnaces will shut down.,” he added.

U.S. Steel is trying to show investors it can move past its legacy blast furnaces. In February, it announced the restart of construction on an EAF facility in Alabama. And in May, the company said it would spend $1bn upgrading facilities in Pennsylvania to produce more high-strength steel for the automotive industry.

“Less efficient capacity should go away, but there is no guarantee that it permanently goes away,” Bank of America’s Tanners said. “It probably doesn’t go down without a fight.”

RELATED CONTENT

RELATED VIDEOS

Logistics Global Logistics Global Trade & Economics Industrial Manufacturing North America
KEYWORDS Global Trade & Economics Industrial Manufacturing
  • Related Articles

    Trump Tariff War Sends U.S. Retailers on Buying Binge

    Unintended Fallout of Trump Steel Duty: Solar Buying Abroad

    Trump Tariff Threat: This Mexico Border Town Is Still Feeling the Pain

  • Related Events

    Driving Supply Chain Sustainability: The Role of Real-Time Visibility Using Vehicle and Location Data

Bloomberg

As Retail Sales Improved, Inventories Rose Less in February Than Expected

More from this author

Wake up to Coronavirus Updates and the latest Supply Chain News!

Subscribe to our Daily Newsletter

Timely, incisive articles delivered directly to your inbox.

Popular Stories

  • Coronavirus-watch-Armada

    Virus Update: Biden Seeks $1.9 Trillion for Relief Bill; India to Supply Millions of Vaccine Doses to Neighbors

    Coronavirus
  • U.S. and China Trade

    How China Won Trump’s Trade War and Got Americans to Foot the Bill

    Global Supply Chain Management
  • Obtaining Adequate Supplies of PPE in the Pandemic

    Watch: Obtaining Adequate Supplies of PPE in the Pandemic

    Coronavirus
  • AT&T

    How the Pandemic Has Altered AT&T’s Global Sourcing Strategy

    Coronavirus
  • Chip Shortage Hits Global Automakers

    Chip Shortage Hits Global Automakers

    Coronavirus

Digital Edition

Scb home issue 27

2020 Supply Chain Innovator of the Year

VIEW THE LATEST ISSUE

Case Studies

  • LSP Saves Customer $1.5 Million a Year With MPO Global Inbound Management

  • Auto Supplier Wows Key Client Using riskmethods Supply Chain Savvy

  • Integrating Shipping and Compliance Saves Conglomerate Millions

  • How a Consumer Goods Giant Upped Its On-Time Delivery Performance

  • LSP Wows Global Client, Quickly Advances to Become End-to-End Provider

Visit Our Sponsors

6 River Systems ArcBest Armada
aThingz BluJay Burris Logistics
DSC Logistics DCSA (Digital Container Shipping Association) DHL Resilience360
Genpact GEP Honeywell Intelligrated
Infor Logility Magnitude Software
MPO Old Dominion Oliver Wight
OpenSky Ports America Purolator
QAD Precision Red Classic Riskmethods
TGW Systems Transportation Insights Watson Land Company
Westfalia Technologies Workjam Yang Ming
  • More From SCB
    • Featured Content
    • Video Library
    • Think Tank Blog
    • SupplyChainBrain Podcast
    • Whitepapers
    • Webinars
  • Digital Offerings
    • Digital Issue
    • Subscribe
    • Manage Your Subscription
    • Newsletters
  • Resources
    • Events Calendar
    • SCB's Great Supply Chain Partners
    • Supplier Directory
    • Case Study Showcase
    • Supply Chain Innovation Awards
    • 100 Great Partners Form
  • SCB Corporate
    • Advertise on SCB.COM
    • About Us
    • Privacy Policy
    • Contact Us
    • Data Sharing Opt-Out

All content copyright © 2016 - 2018 Keller International Publishing Corp All rights reserved. No reproduction, transmission or display is permitted without the written permissions of Keller International Publishing Corp

Design, CMS, Hosting & Web Development :: ePublishing