SMU Data and Models

SMU Market Trends: Most Continue to Buy Foreign Steel

May 8, 2018

The vast majority of companies that buy foreign steel say they will continue to source product from outside the United States despite the Trump administration tariffs. About 88 percent of those responding to last week’s Steel Market Update market trends questionnaire say they will continue to buy foreign, while the other 12 percent say they will cease foreign purchases as a result of the 25 percent tariff on steel.

Many respondents to SMU’s questionnaire believe they must continue to buy foreign steel, even at a higher price to account for the tariff, because they have no good alternatives:

“We have no choice,” said one executive. “The domestic mills won’t produce enough ultra-light material for the needs of the industry. What you can get is still priced way higher than the foreign, even with the tariff.”
“The price for foreign is still lower than the domestic prices as the U.S. producers are gouging the market,” commented another buyer.
“We have to source overseas for light-gauge Galvalume because there is not enough domestic capacity,” said another source.
“We rely on Australia and Japan for all West Coast hot band and cold rolled,” noted another respondent.

The steel tariff is already in effect on product from China, Russia, Japan, and others. Australia, Argentina and Brazil have agreed to quotas to avoid the tariff. Nations including Canada, Mexico and those in the EU were given an extension until June 1 to negotiate deals on how much steel they can export to the U.S. For steelmakers in Canada and Mexico, much rides on the outcome of the NAFTA negotiations, which could conclude this month.