Economy

Raimondo: Sales Strong, but “Trade Issues Scare Me”

June 26, 2018

Behlen Mfg. Co. is among many manufacturers who report strong demand for their products despite all the trade conflict making headlines in Washington. Based in Columbus, Neb., Behlen makes grain storage equipment, building systems and other fabricated metal parts. Behlen President and CEO Phil Raimondo is pleased with his company’s performance, but his pleasure is tempered by the market’s uncertainty. “The trade issues scare me,” he told Steel Market Update. “This is the first time in my career that I have to wake up and wonder what is going on in Washington. It really does affect my company and my job.”

The tariffs have the potential to pick winners and losers with a randomness that is disconcerting. For example, he said, Behlen just landed a big grain bin project in Mexico, but not without some anxiety over Mexico’s trade dispute with the United States. The Trump administration slapped a 25 percent tariff on Mexican steel exports to the U.S., effective June 1, and Mexico immediately fired back with retaliatory tariffs on various U.S. products, including pork and soybeans. Fortunately, that did not have a direct impact on Behlen’s grain bin business. In fact, it might actually prove beneficial, Raimondo said. “If China puts a big tariff on soybeans and pork, they are going to have to find other sources for those products, such as Brazil or Ukraine. Then the U.S. will fill the gap wherever those products came from. Net-net, there will be a lot more inefficiency and maybe even some new opportunities to add storage in some areas. It could potentially help a company like Behlen that makes storage products.”

Freight issues are just as big a concern for the Nebraska manufacturer as trade issues. Like most companies, Behlen is feeling the effects of the industrywide driver shortage. “We still have trouble getting steel picked up and delivered in a timely manner. My people tell me we need another two weeks of material on the floor because we don’t know if freight is going to be available when we need it.”

Behlen has boosted its steel inventory by 5-10 percent to provide some safety stock in the event of late deliveries or short supplies later in the year caused by the tariff on imports. But he expects imports to continue flowing. “At the prices we are paying now, there has to be an opportunity, even with the tariffs, for foreign countries to bring steel into the U.S. There may be spot outages come fall. But if we plan well and don’t get surprised by a huge increase in demand, I think we will be fine,” he said.

Which raises the question: How much of the current demand is the result of companies like Behlen buying ahead to give themselves a cushion? And will that lead to a correction and a slowdown in demand in the months ahead?

It’s possible, said Raimondo, but demand for Behlen’s products has been resilient. “The products we sell through farm equipment stores have stayed at a consistently high level. We don’t see any reason that will slow down. Tax reform has helped a lot of people. That may be the underlying driver. Whatever it is, we want it to keep going.”