The US steelmakers are benefiting from protectionist through price hikes but others suffer

The US president Mr Donald Trump said that the US Steel industry is flourishing on the back of his policies. He mentioned some major steel producers such as US Steel are now performing better and planning to add more production capacity. Indeed, the financial position of steel producers in the US is getting better due to the price rise on the back of 25% steel tariffs imposed early this year.

The US steel industry has been steadily growing over the past three years, but further improved as a result of the protectionist measures. With the reductions in steel imports, mills are now materialising their expansion plans which were announced years ago. For Instance, JSW USA started the construction of its new $500 million plate mill in October 2018 which was even announced before the imposition of new tariffs. Moreover, many US steel mills are now able to restart their idle capacities to meet the excess demand. Steel Dynamics announced to resume production in Kentucky Electric Steel mill in November this year after it was shut down in March this year.

However, unlike steelmakers, those end users and rolling mills which rely on imported materials are relatively passing through tough times. The slab conversion mills are also putting pressure on the government to avoid paying tariffs on imports arguing that the domestic producers are unable to fulfil their slab demand on time. Meanwhile, NLMK USA warned that unless it is exempted from the steel tariffs, it would defer the $600 million investment in the US and also cut around 50% jobs over the next few months.

The hike in steel prices is proving to be a significant problem hurting domestic demand. However, proponents of protectionist measures claim that issues like high prices will prevail in the short term. Prices are going to be settled at lower levels when the industry reaches a new equilibrium based on new demand and supply in the domestic market. This would provide long-term steel industry benefits to the US. However, this new equilibrium would be at what cost, remain uncertain.