Cyclical Steel and Outside Influences
Having worked in the steel industry for over 25 years – as a steelmaker and user – it’s clear to me that this industry experiences cycles. Without researching the experts and data, the down cycles appear to be about two years long and occur about every five years. This interval is affected by outside influences such as the strength of the automotive, aerospace or oil-and-gas industries. The health of companies such as TimkenSteel, highlighted in this month’s cover feature, is currently being affected by the downturn in the oil-and-gas sector.
When the industry goes into one of its cyclical downturns, the calls for protection get louder. This is probably because during low-demand times when steel is more plentiful (worldwide), it is more likely to be imported to the U.S. and other steel-using countries at low costs, which affects the in-country steelmakers. In early 2015, steel imports have captured 32% of the market, which is a historic high. In reaction to the latest cycle, new trade laws purported to save steel jobs have been enacted.
In June, the American Iron and Steel Institute (AISI) applauded the passage (240-190) of the Customs bill by the House of Representatives. AISI says the bill is expected to enhance trade laws by offering more effective mechanisms to curb imports of dumped and subsidized products into the U.S. market. The Senate also approved customs legislation.
ArcelorMittal, U.S. Steel and other domestic steelmakers recently filed a trade case against China, India, South Korea and Taiwan. Filing these types of antidumping cases may have just become easier due to a legislative change that encourages the industry to file more unfair-trade cases. In the past, the steel industry was more reluctant to file fearing they would not meet the injury requirements.
The new legislation says, “… the ITC shall not determine that there is no material injury or threat of material injury to an industry in the United States merely because that industry is profitable or because the performance of that industry has recently improved.” U.S. Steel CEO Mario Longhi called the change “an important first step” to leveling the playing field against unfairly traded imports.
The Trans-Pacific Partnership (TPP) is another proposed trade agreement that may affect our industry and the job security of its workers. We don’t know the specifics of the TPP, but The Alliance for American Manufacturing wants us to tell Congress to ensure that the TPP stops currency cheating. They indicate that during 2013 alone, nearly 900,000 U.S. jobs were lost due to the trade deficit with Japan, and it was their currency cheating that helped grow the deficit. I can’t speak personally about the TPP, but it strikes me as odd that President Obama and the Republicans are working together on this legislation. You decide if that raises any red flags.
While some legislation might have a positive effect on our industry and its workers, environmental legislation is clearly not going to be helpful. An example is the EPA’s proposed ozone regulation. A representative from the National Association of Manufacturers (NAM) testified at a hearing titled “EPA’s Proposed Ozone Rule: Potential Impacts on Manufacturing,” that “over 66% of manufacturers are concerned with how new ozone standards will impact their business.” NAM is encouraging the EPA and the White House to keep current ozone standards in place.
Looking generally at the impacts of the Obama administration’s climate agenda, a study earlier this year indicated that EPA regulations would eliminate 586,000 jobs by 2023.
A previous study by the Heritage Foundation outlined the following projected regulation impacts by 2030:
- 500,000 jobs lost in manufacturing
- 45% of coal-mining jobs lost
- $2.5 trillion in GDP lost
- $7,000 (inflation-adjusted) income lost per person
As we have urged readers in the past, you owe it to yourself, your employees and our industry to pay attention to these issues. Be a defender when you should defend specific policy and our industry, and oppose policy that promises to negatively affect the high-temperature thermal-processing industry. If not you, who will?