TPT March 2019

G LOBA L MARKE T P L AC E

metric tons (mmt) and 11.9 mmt of new capacity, equivalent to as much as 10 per cent of 2018 consumption, is slated to hit the US market by the end of 2022. › That might seem viable in the context of what Mr Fickling terms “the walled garden” that President Trump has built around America’s domestic metal industry. But with customers increasingly under pressure amid rising costs and weakening demand, a likely bet might be that the protective barriers will be taken down by this administration or its successor. When that happens, a US industry dependent on government support rather than innovation will be left exposed, having fallen still further behind its international competitors. “The Trump tariffs aren’t helping American steel and aluminium,” wrote Mr Fickling. “Instead, they’re killing it with kindness.” Elsewhere in steel . . . › On 25 January, the US Congress and President Donald Trump reached agreement to reopen the government until 15 February. At 35 days, the longest government shutdown in US history was over. On the same day, MarketPlace published the article “The Problem with Missing Economic Data”, on the effect of the shutdown on various US government agencies. The section on steel imports, as tracked by the US Census Bureau, is reproduced here verbatim: Data not being released:  Imports on alloy products, stainless steel, carbon steel and more. Who needs the numbers?  Investors, commodity traders and policymakers. What’s the impact?  Steel import data lets us know how much steel we’re buying from other countries .  That’s important, since steel has been such a hot-button issue in the ongoing trade dispute. The US imposed 25 per cent steel tariffs on a number of countries in March 2018; and, while the most recent steel import data said imports were down from the same period a year before, the US is still the biggest importer of steel in the world. That’s the thing: knowing how much steel we’re importing says a lot about how reliant we still are on the rest of the world. Remember, the steel tariffs were sold [by Mr Trump] as a way to protect American steel mills. The last report we got on steel imports was for October. In the meantime, ana- lysts and policymakers will want to know how much steel we’re importing as the trade dispute continues. › Ohio-based Republic Steel announced that it would restart production at its Lorain steel plant later this year. Although the company said that imports of the range of products to be turned out at Lorain are at a historical high, it has refurbished the mill and run internal production trials and anticipates reopening its doors by June. The mill has a reported capacity of 35,000 tons per month. Republic is the leading US supplier of special bar quality (SBQ) steel, and the resumption of production in Lorain will reportedly allow it to expand its size range down to 7.5mm for carbon, free machining and alloy grades. The company is headquartered in Youngstown, with facilities at Lorain, Canton, Massillon and Solon, all in Ohio, as well as at Lackawanna, New York.

Steel The value of US steel and aluminium producers has slumped. An observer sees an object lesson in the dangers of overcapacity One year in, how is President Donald Trump’s mission to save the US steel and aluminium sectors going? Having posed the question in the opinion section of Bloomberg News , David Fickling, a columnist who covers commodities, proceeded to supply the answer: not well at all. (“Trump’s Tariffs Are Killing American Steel With Kindness,” 18 January) He had previously warned about the effects of the Trump administration’s metal tariffs on the domestic companies that consume American steel and aluminium and employ the larger share of the manufacturing workforce. This time, however, he concentrated on the “striking extent of the malaise” around the policy’s presumptive beneficiaries. Mr Fickling pointed out that the aggregate market capitalisation of the seven major US primary steel and aluminium producers – Nucor Corp, US Steel Corp, AK Steel Holding Corp, Steel Dynamics Inc, Commercial Metals Co, Alcoa Corp and Century Aluminum Co – was down about one third since January 2018. On the face of it, he acknowledged, the tariffs seem to be doing the job. The June and September quarters of 2018 saw a representative group of companies posting their largest aggregate profits since 2008. Steel Dynamics, for example, reported record earnings in the third quarter. That is, wrote Mr Fickling, “not nothing.” K illing US steel and aluminium with kindness So how to account for the fact that, despite good earnings, the valuations of US metal manufacturers have fallen to their lowest levels since the 2008 financial crisis? “Investors simply don’t believe that the current good times will last,” wrote Mr Fickling. “[And] they’re right to be sceptical.” The problem for US steel companies was never so much about a glut of Chinese metal as with the never-dealt-with overcapacity in America’s own domestic industry, Mr Fickling asserted. Similarly, he said, the country’s aluminium smelters have been hampered by high-cost operations and outdated technology. The smart way to deal with that is either to cut capacity or to invest in better technology; or, better still, do both, wrote Mr Fickling. The path of least resistance, he said, is “to work the levers of power in Washington to prop up your business at the expense of your consumers by raising barriers to cheaper foreign competitors.” › According to Bloomberg Intelligence analyst Andrew Cosgrove, US metal producers are now ramping up instead of cutting back. He said that between 11.2 million

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MARCH 2019