Trade war fallout

Part of my job as web content manager for the Fabricators & Manufacturers Association Intl.® (FMA), an organization that represents the metal fabricating industry, is spending a fair amount of time reading industry-related news looking for items to share and keep you abreast of what’s happening in this vital sector of the U.S. economy. For the past few months, this news has included some disturbing reports of fabricators closing up shop or moving offshore as a result of the tariffs on imported steel.

Storage safe manufacturer Stack-On Products is closing its two Chicago-area factories and moving operations to Juarez, Mexico, in part because of the tariffs on metal from China. A total of 153 workers will be laid off when the company closes its facilities Oct. 12.

Executives from six Dickson County, Tennessee, metal manufacturing companies recently sent a letter to President Donald Trump urging him to rescind the tariffs on imported steel, which they say have impaired their ability to compete with foreign companies. These companies employ more than 1,000, and their leaders expressed concerns that they may have to lay off workers.

These are not isolated events. Fabricators are suffering, as are other sectors affected by an ever-widening array of tariffs. And the effects are hitting some areas in ways that might not be top of mind. For example, the Detroit Free Press recently described the trade war’s impact on two family-owned scrap yards in Michigan.

“China is the largest consumer of scrap commodities. And Michigan is a major exporter, generating multimillions of dollars in business when it comes to recycling metals.

“So, when China slapped retaliatory tariffs on aluminum waster and scrap in April, recycling operations, including two deeply-rooted, family-owned businesses in Michigan, found themselves on the front lines of the trade war.

“It's not an esoteric economic shift that will only hit a few guys running scrap metal outfits across the country. Consumers who haul stuff out of basements, backyards and garages hoping to make a few bucks by scrapping already are seeing far less money in return for junk.

“In some cases, those who haul old swing sets out of the backyard and other recyclables in the Detroit area can expect 60 percent less than the prices obtained back in March.”

The article gives a detailed account of the tariffs’ effects on Kimmel Scrap Iron & Metal Co. and PADNOS. Robert Kimmel was quoted in the article as saying, “I support my president for what he’s doing. I’m a little bit worried how he’s going about it. It’s a little bit too much hammer and not enough carrot.”

Jeff Padnos remains hopeful that things eventually will calm down. “Nobody’s lost a job here. Nobody will lose a job here. We have to find other markets.”

Job loss is a concern for metal fabricators. Freedonia’s "US & China Tariff Impact Report August 2018" noted that “the largest near-term beneficiaries of the tariffs the Trump administration has imposed on China (and other countries) are domestic steel and aluminum companies (e.g., Alcoa, Century Aluminum) and, particularly, the mining companies that supply them with iron ore. For example:

• Following enactment of the initial steel and aluminum tariffs in June 2018, Acero Junction, a once dormant steel plant in Mingo Junction, Ohio, received a $500 million investment from Indian concern JSW Steel.
• In the Iron Range region of northern Minnesota, mines are expanding production capacity to meet growing iron ore demand.
• U.S. steel industry leader Nucor credits tariffs with rapidly rising investment.

”All told, the tariffs are forecast to generate more than 25,000 new jobs in the U.S. domestic steel and aluminum industries over the next three years. However, net U.S. job losses over that period are expected to near 400,000 and retail prices are anticipated to increase on a wide range of consumer products (e.g., appliances, motor vehicles, windows and doors) that rely on metal imports from China to keep production costs low.”

Regarding the effects on the scrap metal market, falling prices might curtail metal theft. There’s that.