The ore, metal and steel industries have been sluggish in the past decade.
And though several, disparate reasons can be
quoted to explain the contraction, popular opinion points to the ingress of
foreign competition. Particularly from countries like Brazil, China and Russia.
On one hand economists believe that competition transformed the productivity of
the iron ore mines
and it can spur innovation in the steel industry thereby improving
exports.
On the other, many industrialists are eager to
see whether a more US-focused strategy can give struggling metals companies a
better chance.
Understanding the latest surge in steel and
metal stock prices and the general outlook requires an objective review of the
facts.
How is the Steel Sector Changing?
Late February 2018 news trickled from the
White House that the US would impose steep tariffs – to the tune of 25% on steel imports and up to 10% on
aluminium imports
as a strategy to protect national manufacturing interests.
Kentucky based Century Aluminium will likely
rehire 350 workers operating at full capacity as compared to the two-fifths it
chooses to invest in right now. This is a pre-emptive move in anticipation of
greater demand for home tempered steel.
Steel and metal stock prices have spiked
accordingly. Steel stocks now cost 28% higher than what
they have in the last 12 months.
The fact that the tariffs may be tiered,
levying more taxes on imports from countries like China and Russia as compared
to other nations is another factor being viewed as a move to deter the
unchecked inroads of low-priced Chinese steel.
Long Term Implications of the Decision
No one can accurately predict the dips and
highs in the steel and metals market. Higher tariffs can indeed give the impression
of a safety net in the short run. But it may trigger similar responses from
other nations creating an export stalemate.
Most importantly the question on the horizon
is this: “Can the US satisfy the demand
for steel without importing from others?”
If it can’t, the end result may be a spike in
the prices of all commercial goods and commodities that rely on the steel and
metal industries.
Has your business already seen impacts from
the recent steel tariffs? Join the conversation on Twitter.
