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Steel tariffs disproportionately hurt small manufacturers: execs

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Steel tariffs disproportionately hurt small manufacturers: execs

Atlanta — The impacts of steel and aluminum tariffs are having a disproportionate impact on smaller manufacturers as compared to larger manufacturers, executives told the Steel Market Update conference in Atlanta Wednesday.

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During the morning session, executives from two manufacturing companies laid out the issues they were facing as a result of the tariffs and ongoing trade uncertainty.

"It is hard to plan your business when tweets change your marketplace," said Christopher Shipp, sales vice president at Priefert Steel.

The Texas-based company operates four different steel plants in Texas, Arkansas and Idaho. It has already paid more than $400,000 in tariffs this year and delayed $5 million worth of expansion plans following the implementation of steel tariffs in March, according to Shipp.

The rapid rise in prices has caused the company to implement four price increases this year for customers and is struggling to push the higher costs through the supply chain. Prices are at a point where customers are delaying orders, saying "it's not worth that. We'll wait," said Shipp.

Coupled with higher prices, rising borrowing costs are negatively hurting the company's customer base.

There are a lot of small fabricators Priefert is selling to that are having "issues with paying the higher prices of steel and paying their bills," Shipp added.

Elevated steel prices in the US compared with the rest of the world is going to turn manufacturers to go overseas in order to stay competitive, according to John Axelberg, president of General Stamping and Metalworks.

As long as the tariffs remain in place, the elevated spread of US steel prices will stay, he said.

Some of Axelberg's larger original equipment manufacturer customers are likely to source material from overseas instead of the US as a result of the price levels. They are saying: "Well, we've got a business to run" and it is just not competitive to source their needs from the US, he added.

Still, the fact that the tariffs have negatively impacted business in the steel industry came as a surprise to Nucor CEO John Ferriola.

While speaking at the same event, he was presented with poll results that showed a nearly even split between respondents experiencing negative and positive benefits from the tariffs.

The poll consisted of nearly 400 attendees at the conference, consisting of steel mills, distributors, traders and manufacturers.

Ferriola noted that while Nucor is seeing record profits, companies manufacturing steel-intensive products like Caterpillar, John Deere, Martin Marietta, Praxair and Fiat Chrysler also reported record second-quarter 2018 earnings.

"Yes, Nucor is doing well, the steel industry is doing well, but everybody is doing well," he said. "Our customers are operating at a phenomenal level. We're selling more steel, they are producing more products, and they are seeing [higher] earnings."

--Michael Fitzgerald, michael.fitzgerald@spglobal.com

--Edited by Keiron Greenhalgh, keiron.greenhalgh@spglobal.com