EuroWire September 2018

Transatlantic Cable

Image: www.bigstockphoto.com Photographer Adrian Grosu

† While it is too early to declare a feasible substitute for aluminium, one early “winner” interviewed by Mr Deaux was Steve Conboy, the general manager of M-Fire Suppression Inc (Torrance, California), which treats construction lumber to fortify it against fires. He said his company is already seeing more attention to building affordable housing with lumber as a substitute for steel. According to Mr Conboy, the product, cross-laminated timber, has the strength for use in building skyscrapers. He added, “Tariffs are going to push this into the housing market to make affordable housing with wood.” How should a US senator, a Trump supporter, react when the protectionist tariffs threaten a one-of-a-kind steel maker? An article in the Dayton (Ohio) Daily News considered the position of Ohio Senator Ron Portman vis-à-vis AK Steel, the last electrical steel manufacturer in the United States and the lone supplier of that special steel in all of North America. With some 2,400 full-time employees at its Middletown Works and corporate headquarters, the company also employs 1,400 people at its Butler Works in Pennsylvania, which includes a GOES (grain-oriented electrical steel) production line; and 130 at its Zanesville (Ohio) location, which includes a finishing line. Mr Portman believes that action is needed to address the worldwide overcapacity of steel, but that the USA should take a more targeted approach, telling the newspaper: “We should focus on countries that distort markets and repeatedly violate trade laws, and on the steel and aluminium products that are most at risk from a national security perspective.” (“AK Steel Wants Electrical Steel Tariff Loophole Fixed,” 8 th June) From information supplied by spokeswoman Lisa Jester, Daily News reporter Eric Schwartzberg outlined AK Steel’s singular status. As the sole domestic producer of GOES, it makes a product that is essential to the nation’s electrical grid. Imports of this steel were up 98 per cent in 2017. In fact, according to Ms Jester, imports of GOES from China increased nearly 2,000 per cent from 2015 to 2017. When, on 1 st March, President Trump announced penalties of 25 per cent on steel and 10 per cent on aluminium, he invoked

Steel

As steel and aluminium costs surge for US companies, the search is on for alternative products

On 1 st June, American buyers of Canadian, Mexican and European Union steel and aluminium were suddenly confronted with an unwelcome new reality as US Customs and Border Protection started applying tariffs on these imports at land crossings and ports. The tariffs had taken effect just 15 hours after their suspension was ended by President Donald Trump, in what Joe Deaux of Bloomberg News described as “a once-unthinkable action that swiftly created winners and losers.” Among the losers is Atlanta-based Novelis Inc, a maker of flat-rolled aluminium products, whose vice president of global automotive, Pierre Labat, knew that his troubles had just been flicked up a notch: the higher domestic prices dictated by the tariffs would encourage consumers to find alternatives to steel and aluminium. (“Within Hours, Trump Tariffs Force Firms to Confront New Threats,” 1 st June) The company had already been forced to accept rising shipping costs on aluminium and passed them through to its customers. The price to ship aluminium to the US Midwest rose 125 per cent in 2018 through to the end of May amid speculation that the USA would put up trade barriers. Now that this had come to pass, “It could potentially down the road reduce the competitiveness of aluminium as the material of choice for our customers, for the automotive and specialities markets,”Mr Labat said in a phone interview with Bloomberg . † A curiosity of the situation is its apparent perversion of Mr Trump’s expressed purpose for imposing the 10 per cent tariff on aluminium and 25 per cent tariff on steel: to protect domestic manufacturers. The presumably unintended consequence of penalising Novelis Inc is tolerable to Mr Trump, whose willingness to punish even friendly trading partners demonstrates a focus amounting to monomania: on China as a source of cheap imports. If China is to be thwarted, some USA companies must presumably be willing to “take their lumps.”

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September 2018