COVER STORY
By Charlie Carter
Despite steel tariffs,
GOOD DAYS AHEAD
Steel surplus will support construction into near future
U.S. domestic capacity for structural steel (if mills are running at 100%) is equal to about 10 million tons. Credit: Gabriel Steel Erectors
T
he construction market continues to be strong. We think 2019 will continue up from 2018 with about a 4% increase in construction. The complete picture continues to evolve, with industry speculation on the impact that a 25% tariff on imported mill steel materials will have on the market. It is important to note that domestic steel is tariff-free. These tariffs are not the result of an industry trade suit, but an investigation carried out by the Department of Commerce that determined that the current level of steel imports into the United States was detrimental to national security.
What types of materials are included in Section 232 tariffs? • Rebar - These tariffs have a broader implication for the construction market. There is almost as much steel in a concrete-framed building as there is steel in a steel-framed building due to the density of rebar. So, any effects that these tariffs have on steel-framed buildings will have a similar impact on concrete-framed buildings. • Long products include beams and columns as well as other miscellaneous structural shapes. • Pipe and tube products, such as hollow structural shapes (HSS). • Flat products, such as steel plate. Imports from Canada and Mexico are
Charlie Carter is President of the American Institute of Steel Construction (AISC), one of SEAA’s strategic partners. He spoke at SEAA’s 2018 Convention last spring. The following article is excerpted from his presentation.
no longer exempt from these tariffs. However, there are high level discussions taking place now that consider eliminating Section 232 tariffs in favor of a quota agreement, depending on the outcome of the new USMCA (previously known as NAFTA). Other country exemptions are currently in place for Australia, Argentina, South Korea, and Brazil. All of these countries, including Canada and Mexico, represent more than half of the steel being imported into the United States. There is a separate 25% Section 301 tariff specific to China that now includes fabricated structural steel. This is due in part to AISC’s two testimonies back in April and May of this year on behalf of the fabricated structural steel industry. Despite some of the scary headlines in the media, a 25% tariff does not equate to a 25% increase in the project cost. Material cost increases in a project are minimal when you reduce it down to the part of the project that’s affected (material only). Ultimately, the marketplace will determine the price impact
28 | THE STEEL ERECTORS ASSOCIATION OF AMERICA
on domestic material based on the complexities of the market. Because construction is booming in many steel-intensive industries including energy and oil and gas, a higher demand for the product will have a much more significant impact on pricing than a tariff on foreign material. It also is important to know that there is no capacity problem for steel producers or fabricators. U.S. steel producers can supply enough steel to meet demand although lead times for certain products have been extended. Our U.S. domestic capacity for structural steel (if mills are running at 100%) is equal to about 10 million tons. On the demand side, steel consumption in 2016 was 6 million tons, leaving roughly 4 million tons of extra capacity within our domestic steel-making industry. In 2017, U.S. imports of all steel were less than 2 million tons. The bottom line is this. Even if the domestic producers had to cover all 2 million tons of steel imported into the U.S., there would still