Recent articles have ripped Donal Trump for reportedly using Chinese steel and aluminum on past building projects.
As a steel trader for the past 30 plus years, I find this much ado about nothing.
Fist of all, this is a free country with free trade. We import and export steel into and out of the USA. Some of my closest friends work for domestic steel mills while others are buyers of both domestic and foreign steel.
Foreign steel is sold here for several reasons.
One: Price
If a contractor can buy steel for a discount from domestic steel, this lowers his costs. He must consider all costs when submitting his bid. If all else is equal, labor costs, overhead, equipment etc., but he has a 2% advantage on steel costs over his competitors, then he has a better chance of winning the bidding process or improving his margins. I don’t know any companies not looking to lower their steel costs.
Two: Availability
There are certain products that domestic steel mills do not like to produce, such as thin gauge galvanized sheet, or other products that are not efficiently produced on their mill. When this is the case, mills raise their price to the point where they basically price themselves out of the market. This means buyers call traders and other mills searching for additional suppliers. Imports are one source.
Three: Alternatives
This may apply more to steel service centers and manufacturers that buy regular volumes of the same steel product. Most companies like to have two to three sources and at least one or two import alternatives. This is insurance against the unknown and the known. What happens if their biggest source goes on strike? What happens if import prices drop dramatically and their biggest competitor uses all imports? What if domestic mills continue to raise their prices beyond their raw material increases, but foreign mills do not?
The future 2017 and beyond
The opportunities for domestic mills should increase as the government funds road and infrastructure jobs in 2017 and beyond. I’d suggest the domestic mills look at more efficient means of producing bridges and the steel beams that are needed for them.
There should have been more outrage than there was when CALTRAN used the majority of their steel for the Oakland- San Francisco Bay Bridge from China. They say buying the steel from China saved California $400 million. Here is a link to one article on this subject. http://www.nytimes.com/2011/06/26/business/global/26bridge.html?_r=0 [1]
Maybe USW should talk to their Democrat brethren about why this was allowed.
Donald Trump is building private jobs that he has financed. He found business advantages in imported steel, which he used. Kudos to him.
If you think you should be outraged by private companies importing steel, I have a bridge to sell you.
