While it is hard to predict anything with certainty during these times, there does seem to be agreement that the current tariffs imposed by the United States on steel goods will continue for the foreseeable future. Eliminating Section 301 tariffs already in place will be exceedingly difficult for President Joe Biden, and many political analysts have stated they believe any actions on trade violations are unlikely in 2021. Biden has, however, emphasized an interest in strengthening domestic production, and stocks in domestic steel companies have increased in recent weeks as a result. So far, these tariffs have helped domestic PVF producers, like my company, see an increase in sales and demand over the last three years.
In 2018, Section 232 of the Trade Expansion Act of 1962 and Section 301 of the Trade Act of 1974 saw an additional duty of 25% on Chinese imports of industrial technologies imposed by President Donald Trump in an effort to increase America’s lead on technology and innovation — protecting America’s competitiveness in the market. This greatly impacted companies specializing in pipe, valves and fittings. Overseas material became much more difficult to obtain, while domestic production saw a much-appreciated increase in sales.
The original tariff recommendation came from the Department of Commerce after a nine-month investigation into imported steel effects in which the department ultimately recommended a 24% tariff to help American steel producers better compete. These tariffs succeeded in bringing down import market share, where in previous years, imports had reached as high as 35%. 2020 saw just 18%. With these imports down, America’s steelmakers have started investing at home. One of the country’s top plate producers, Nucor Steel has started work on building a new plate mill in Kentucky, and U.S. Steel opened doors to a new plant in Alabama in October, which should produce 1.6 million tons of steel per year.
70% of steel produced in the United States is from electric arc furnace (EAF,) a much cleaner crude steel production process. China is at just 10% of steel being produced from EAF, and much of what it produces is from dirtier blast-furnace-based steel with high CO2 emissions and lower quality being the most concerning. COVID-19 has made getting steel and other PVF products more difficult because it is not being produced in enough quantity to meet the current demand.
At the onset of the pandemic, many companies cut back production both for economic reasons and because of the uncertainty of the market. As demand increases, supply will be limited until companies have ramped back up to previous production and staff levels. Prices on PVF materials are on the rise and have been increasing in recent days, as demand is drastically pushing upwards in the right direction. This has affected the cost of shipment of materials overseas as well, which is up over 10% from previous years and is currently experiencing increased lead times.
Currently, it is believed that Biden will support a carbon border tax that would impose or keep tariffs on lower-quality steel from China and other countries to help reduce the impact on domestic production and protect domestic industries from global imports. The European Union does not expect Trump’s tariffs to be immediately repealed by the Biden administration, and Biden himself said he would be willing to review, but not necessarily change these tariffs.
In recent weeks, many PVF companies have seen the market pick up and demand increase, and 2021 is expected to be better than this previous, dreadful year. In almost every phone call I’ve had recently with colleagues, customers and vendors alike, one of us has said, “Hang in there!” Which is exactly what we should do.
Gabe Hatfield is president of OK Pipe & Fittings, and has a BBA and MBA from Baylor University. He volunteers for the PVF Roundtable and sits on the PVF Young Professionals committee. He is current chairman for San Jacinto College Pipefitter/Fabricator Advisory Committee.