While a number of new steel projects have been announced in the U.S., none of them add up to the kind of massive greenfield investment necessary to help U.S. mills better compete in world markets or for the 20 per cent of the U.S. market usually fed by imports, Connelly said.
Indeed,
many of the investments announced seem to be incremental, he said, aimed at making up for upkeep that was postponed during previous market downturns.
“
If you examine production from before the tariffs came in March 2018 and after, you don’t really see a structural shift that can’t be explained by regular seasonal variation in the data,” Connelly said.
Part of the challenge, he added, is that
firms are unlikely to invest heavily in new operations if they think the tariffs are temporary.
“If we think the U.S. really wants to add more long term sustainable jobs to the industry then what they really need to do is substantially reduce imports. That suggests the tariffs have to be permanent for long term business planning.”
Though the U.S. initially exempted Canada and Mexico from blanket tariffs of 25 per cent on steel imports and 10 per cent on aluminum, Trump allowed those reprieves to expire on June 1 pending the outcome of the NAFTA talks. That prompted Canada to immediately hit back with retaliatory tariffs on $16.6 billion worth of American steel, aluminum and a range of other goods.
Since then, the flow of steel over the border has stalled. Canada is the largest foreign supplier of the alloy to the U.S., accounting for 16.1 per cent of the country’s imports. In addition, half of all hot rolled steel imports — a key material in auto and other manufacturing — are from NAFTA countries, said Phil Gibbs, director, senior metals equity analyst at Ohio-based Keybanc Capital Markets.
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