The American populace witnessed significant debate on the domestic steel economy this Presidential election for this first time in many election cycles. While this focal point was welcomed by those in the industry stateside, many began to wonder exactly how each candidate would look at and shape trade policy and ultimately the steel market. Once elected, President Elect Donald Trump promised harsh sanctions and tariffs and protectionist move against foreign steel, and to repeal NAFTA and the future TPP. While the legality of repealing NAFTA and some proposed policies are still in question, it appears that some of his promises about protecting the domestic steel market are starting to bear fruit. This has especially been so with several recent appointments The President Elect has made.
Robert Lighthizer, an attorney who has spent years representing manufacturers in United States trade cases, has just been nominated by President Elect Trump to be the United States Trade Representative (USTR). The USTR is a cabinet level position who reports directly to the President and serves as the President’s chief negotiator on foreign trade. Lighthizer, a previous deputy USTR in the Raegan administration, has represented domestic steel market interests against foreign nations and companies throughout his legal career, including representing US Steel (X) in their countervailing duty and anti-dumping petitions.
In addition to Lighthizer, Don DiMiccio, the former CEO of NUCOR Corp., has been working as the head of the USTR transition team for the incoming administration. With both men having vast experience in the domestic steel industry, and with additional junior members being named to the USTR office with similar experience representing domestic steel interests internationally, it is most likely that the USTR and his office will be targeting and trying to limit imported steel throughout the length of the administration.
Outside of the USTR, other appointments made by the President Elect echo a protectionist sentiment. Wilber Ross has been nominated as the Commerce Secretary and will head up the Commerce Department. Ross consolidated, formed, and sold the International Steel Group (ISG) to ArcelorMittal SA back in 2002. In addition, the President Elect has created the White House National Trade Council, and has named Peter Navarro as its head. Navarro is a professor of economics at the University of California Irvine, is a strong proponent anti-China trade policies and leanings. The National Trade Council, USTR, and Commerce Secretary and his department will now all work to advise the President elect on foreign trade policy.
So what does this all mean for the future price of steel and more specifically flat rolled steel during the new President Elect’s administration and further into the future? The exact policy that will stem from these new appointments remains to be seen. It is not hard to draw conclusions that the President Elect is emphasizing a strong focus on protecting domestic steel interests, regardless if the effectiveness of the strength of his protectionist focus is still in question in the world’s largest free market economy. As a result, the long term future of the price of steel in the market and downstream domestic market remains a mystery. However, many in the industry are optimistic about increasing prices and greater profit margins as potential foreign hot rolled steel, cold rolled steel and coated / galvanized steel inventories begin to dry up because of an inability to replenish stocks.
If you have any questions about the direction of the market and how our purchasing programs can hedge your price risk, please call Camden Yards Steel today at 856-342-7100. As always, thanks for stopping by!