ISSUE 3 / 2018
THE PUBLICATION FOR THE INDUSTRIAL PROJECT SUPPLY CHAIN INDUSTRY
ISSUE 3 / 2018
RISKING BUSINESS Editorial by Janet Nodar
VIP SHIPPER CLUB MEMBER:
TATA INTERNATIONAL .................................................................. page 18
THOUGHT LEADERS
RISKING BUSINESS
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BY JANET NODAR BREAKBULK CONTENT DIRECTOR
For more on the tariffs, see “US Tariffs Shake Up Steel Sector” on page 36.
Above credit: Keith Necaise Photography
resident Trump’s recent statements regarding broad steel and aluminum import tariffs imply that the U.S. steel industry, and related jobs, will benefit from trade protection. What is the evidence for this? An elaborate mesh of trade laws already directs the flow of the global steel trade. The U.S.-Brazil steel trade, for example, is constrained by extensive anti-dumping and countervailing rules and has been moribund for more than a year, according to Peter Svensson, senior vice president with Clipper Group. Clipper operates an important steel service on the Europe-U.S. trade lane. Svensson said that they saw a number of cancellations on long products “instantaneously” on this service when the Trump tariff announcement came out in March. However, clients started booking again when the grace period was declared, and volumes held steady through mid-April. The U.S. produces about 70 percent of all steel used domestically, a percentage that has been increasing since 2010. Most steel manufacturing jobs that have been lost disappeared due to consolidation and innovation, not foreign competition. Imports supplied roughly 18 percent of the U.S. steel needs in 2017, according to The EconoFact Network. Ricky Kunz, chief commercial officer with the Port of Houston Authority, said that steel imports at the port actually increased during the first quarter of 2018, up 11 percent over the first quarter of 2017, due to a strong regional oil and gas sector. U.S. industry jobs using steel or steel inputs vastly outnumber steel production jobs. Veronique de Rugy, a senior research fellow at the Mercatus Center at George Mason University, writes that there are only 140,000 workers in the U.S. steel-producing industry, while there are anywhere from 5.4 million to 12 million working in steel-consuming industries such as aerospace, heavy equipment, oil and gas, construction and auto manufacturing. Tariffs designed to protect steel manufacturers from imports are likely to trigger instability and risk in this much larger steelconsuming sector. The more discreet steel tariffs imposed by the Bush administration in 2002 led to lost jobs, to companies sourcing scarce steel products overseas, and to
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steel-using companies relocating overseas altogether. Thanks to the Trump tariff grace period, “we have not seen the worst-case scenario that we took into account initially,” said Robert Drew, global logistics manager with Tata International, the core trading company of global conglomerate Tata. Tata International is primarily focused on breakbulk steel. However, “it has impacted our business in that any uncertainty in the markets produces a reluctance to move forward with things that otherwise would be routine.” Trump cited Section 232 of a 1962 trade regulation, which allows import restrictions to protect national security, as a rationale for his proposed tariffs. Is U.S. national security genuinely at risk because we import steel? Total U.S. military requirements for steel and aluminum sop up only about 3 percent of U.S. production, according to the Department of Defense, which recently sent a memo to that effect to the Commerce Department. Meanwhile, the military and the defense and aerospace industries have told national news sources that they are concerned about the effect indiscriminate tariffs will have on complex trade relationships with long-time allies, about a potential degeneration in our ability to build coalitions in the face of actual military threats, and about U.S. economic security. Some observers theorize that Trump is playing a game of “cosmic Jenga” – threatening steel tariffs in order to leverage Chinese cooperation over LNG contracts, or intellectual property rights, or perhaps commodity imports. But, why not address those issues directly? How does this help? “It’s frustrating that this comes at a time when the economic climate is such that there should be a lot of opportunity,” Tata’s Drew said. “These are cyclical situations, and when it’s your inning, you should be able to take full advantage of the situation ... This obviously doesn’t provide you with the cushion you need to deal with the inevitable changing of the cycle.” Every negative effect of Trump’s tariff threats, including the trade wars they are likely to trigger if enacted, has been thoroughly predicted. There are no surprises here. There is only the riddle of why anyone would think this is a good idea. BB ISSUE 3 / 2018
CREATING VALUE AT EVERY POINT OF TRANSFER
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Breakbulk VIP Shipper Club is an invitation-only membership program for project owners and developers, EPCs, manufacturers of industrial equipment, oil & gas service companies, energy firms, chemicals producers, mining companies and metals producers. The club is a central hub for all those who are involved in projects that require oversized cargo. For nearly three decades, Breakbulk events have brought shippers together with service providers to forge a reliable industrial supply chain. Members may grow their positions as thought leaders to the industry by participating as panelists at Breakbulk events, serve as mentors in our Education Day programs to help encourage the next generation of leaders, and offer insight and guidance as editorial resources for Breakbulk Magazine. There is no fee for membership in Breakbulk’s VIP Shipper Club and all members receive free admission to Breakbulk events around the world – in Houston, Dubai, Shanghai and Bremen. To apply for membership, visit breakbulk.com/vip-shipper-club