The steel industry has been a major talking point for politicians for the past few months. That has caused politics to have an unusually large impact on the industry this year. While there have been other factors that have had an effect, most commentators have been focusing on the interactions between the American steel industry and the Trump administration.
Most of the American steel industry has been doing well this year. Production and profits are both up for most companies, with minimills seeing the biggest improvement by a large margin. Bradford Research found that minimills have seen their profits increase by anywhere from 50% to 100% in the past year.
Stock prices showed a sharp increase in the early part of the year because investors expected the Trump administration to focus on infrastructure, which could bring big profits to the industry. While some companies have seen improvements, U.S. Steel failed to meet expectations. It lost money during the first quarter and its value fell by 27% due to that loss. So far, each company’s success or failure in the industry has come down to their position in the market and their strategy rather than the conditions of the industry as a whole.
China remains the biggest threat to the American steel industry. The American government recognizes that China’s overproduction of steel can cause the global price of steel to drop. The cost of labor is low in China, so Chinese firms can deal with that drop. Since American wages tend to be higher, and most American manufacturers pay much more for safety than their Chinese counterparts, a drop in prices would do much more harm to American companies.
The Trump administration is considering protective tariffs on Chinese steel. That could discourage American companies from importing Chinese steel, but it could also start a trade war with China. That is not something that the government wants to happen, so it isn’t likely that China will face massive economic sanctions on its steel industry.
Buy American Order
The Trump administration also issued an executive order that requires the government to properly enforce that encourage companies to use American steel. That could be a boon for the industry, but many individuals in it are skeptical. The sheer number of loopholes that people can use to get foreign steel means that these policies rarely have a large impact. Some are also worried that enforcement could cause shortages of some products that are rarely produced in the United States. The expected impact is low, but the order could lead to large changes if it sees unexpected success.
Things to Come
The industry’s future will depend on the success or failure of the current administration’s policies. If the government begins major infrastructure projects or offers significant economic protections, the industry will expand. If not, large companies are likely to see their stocks return to previous levels. Minimills are likely to see continued success either way, and are likely to become even more important as the year progresses.