Have decreases in foreign material impacted domestic supply as initially anticipated? This is One Big Question on the minds of many these days. And we asked risk managers weigh in.
The topic of steel tariffs remains front-and-center on the mind of industry leaders these days. When the Trump administration announced a 25 percent tariff on steel imports and 10 percent tariff on aluminum products back in March, there was no telling what type of impact it would have on the market.
Roughly seven months later, that level of uncertainly remains. As we prepare for 2019, one question that remains on the minds of many is this: How does a decrease in foreign material continue to affect supply?
Ryerson risk managers weigh in, saying that with all else being equal, a decrease in foreign material availability should tighten supply/demand conditions within the U.S. This likely provides U.S. mills with price support, negotiating leverage, and may even spur investment into domestic production capacity.
In the long run, those foreign tons may be replaced by new/restarted domestic production, but in the short run, it would be supportive of increased prices for steel and aluminum.
However, the import of some products, like aluminum, is not abating at the rate initially anticipated. This can be attributed to two factors:
1) Domestic spreads vs. foreign spreads reached a level in carbon whereby foreign prices continued to look attractive, even after the 25% tariffs.
2) Manufacturing activity is robust, so domestic buyers were willing to pay tariffs simply to avoid stockouts of material. As such, imports never really fell off as one might have expected.
For a typical industry professional, the prospect of actively monitoring global metal prices—particularly aluminum these days—with any level of confidence can seem overwhelming. Prices are in constant flux, and it can be difficult to determine which sources are most trusted and reliable.
Each month, Ryerson engages product and risk managers to analyze market and economic indicators that are driving supply and demand. Data analyzed from various market resources is packaged and delivered in a monthly market update e-newsletter, made available to registered users.