Economy

SMA Calls for Section 232 Remedies ‘Sooner Rather Than Later’

January 28, 2018

As plugged into Washington as they may be, the leadership of the Steel Manufacturers Association is in the dark on Section 232, just like everyone else. Queried by reporters last week during SMA’s board meeting in Florida, the trade group’s officers could offer no inside information on what to expect from President Trump as he continues to ponder whether to restrict steel imports on national security grounds.

“We think the administration should announce remedies sooner rather than later. We think it is very important we get on with this process,” said SMA President Philip Bell. “We understand the administration must thread the needle here. There are a lot of interests involved, that of domestic steel producers, our end-user customer base, as well as our allies and NAFTA partners. We are confident the president will come up with remedies that are effective, meaningful and impactful taking all those different variables into consideration.”

As Bell noted in his opening remarks, the pending trade decision could have tremendous ramifications for domestic steelmakers. “Even as we speak, the U.S. steel industry is still under assault from dumping, subsidies, state ownership, transshipments, circumvention, unfair trade practices, counterfeiting and cheating. It is time for us to seriously address these issues.”

Yet, asked Steel Market Update, how can domestic steel producers reconcile their appeals for government assistance at a time when they are reporting such strong earnings? As Bell pointed out, Section 232 was initiated by the administration and caught the industry by surprise. “It was not something the steel industry lobbied for,” he said. But the market has serious long-term structural issues that must be addressed, including excess global capacity and currency manipulation. “Good corporate earnings reports can be temporary in nature.”

Mark Millett, president and CEO of Steel Dynamics, Inc., offered a historical perspective. When SDI was formed in 1993, there were 55 principal steel producers in the United States. Today, there are only 15. “The steel industry has done its job to rationalize through attrition, and it still cannot earn its cost of capital as an industry in a world where sovereign states are producing subsidized steel and manipulating their currency.” National security is not just about having enough steel to make tanks and bullets, he added, “it’s a matter of having a strong enough economy to support the country in a time of need.”

“Without economic security there can be no national security…and without manufacturing jobs there can be no economic security,” said Tracy Porter, executive vice president of CMC Operations and SMA Chairman. The U.S. steel industry has adjusted its cost structure, at the cost of thousands of steel jobs, to make it the most efficient and competitive in the world. Yet it faces a world market where the majority of steel capacity is state owned. “I think we are in the fight of our lives in terms of protecting our economy from these unfairly imported products. The day has come and it’s time to reckon with this,” he said.

The SMA executives expressed support for the North American Free Trade Agreement and would not like to see the Trump administration pull the U.S. out. “Since we entered NAFTA, the steel trade between the countries has doubled, so we are very interested in keeping that agreement alive,” said Dave Sumoski, Nucor’s executive vice president of merchant and rebar products. SMA sees NAFTA as a net positive for steel producers, Bell said, considering the millions of tons of steel and raw materials that move back and forth across the border. “We feel it’s very important that we stay in NAFTA, and there are a lot of other domestic industries, primarily agriculture and automotive, that feel the same way. The focus needs to be on making the 25-year-old agreement better.”

SMA and its members will be glued to President Trump’s state-of-the-union remarks this week for any indication of how and when he may act on Section 232.