Some of the region’s steelmakers and small manufacturers found the Trump administration’s 25% tariff slapped on steel imports almost two years ago was not the business boost they were promised.
Customers accustomed to paying a certain price for their products were not keen on seeing their costs jump because of the tariffs, company officials said.
“I thought it was going to be a much better overall process for us, but it turned out to be a slightly negative impact,” said James Philipkosky, chief executive of MLP Steel in Scottdale.
With tariffs raising the price of foreign steel — which had served as a regulator in the marketplace — domestic prices jumped 20% in the second and third quarters of 2018, said Philipkosky, whose company operates Fayette Custom Wire Products LLC in Scottdale and Laurel Custom Grating LLC in nearby Everson.
Because of stiff competition, MLP could not pass along 100% of the price increases to customers when “steel prices in the United States actually went up quite a bit,” Philipkosky said.
The combined plants, with between 45 and 50 employees, are steel-intensive in their products. Fayette Custom Wire buys large spools of U.S.-made wire and makes it into products used in roads, bridges, buildings and vehicles. Laurel Custom Grating turns carbon steel, stainless steel and special alloys into heavy-duty drainage grates used on roads and bridges.
“We’re competing with multi-national companies that have a broader base,” said Philipkosky, who purchased the former Marwas Steel Co. in Scottdale in January 2008.
Small manufacturers like MLP Steel are not large enough to hedge their bets on tariffs or build steel inventory three-to-six months in advance before prices increases that follow tariffs, Philipkosky said. But, the company had the space to store some of the lower-priced inventory in its warehouse, he noted.
“If you’re not big enough, you can’t hedge it. If there is a downturn, you are stuck with it ,” said Philipkosky, who grew up in Long Branch, Washington County. He went on to earn business and engineering degrees from Harvard and Columbia universities before becoming a successful venture capitalist.
On the bright side, “things are stable for growth,” Philipkosky said.
Exemption sought
The tariffs made it tougher for Ed Sikora’s JATCO Machine & Tool Co. Inc. in Bellevue, which manufactures precision thermoplastic injection moulds for Fortune 500 companies. The company experienced the same hit on production costs.
His company relies on the imported finished steel from China for the injection moulding parts because it is cheaper than making it here, Sikora said.
“We can’t afford to absorb that cost,” so the company had to pass along the increase to its customers, Sikora said. It made sure in its billing to attribute the price hike to the tariffs, said Sikora, executive director of the Pittsburgh Chapter of the National Tooling & Machine Association.
Neither have the tariffs made life easier for a $4 billion company like Pittsburgh-based Allegheny Technologies Inc., a stainless steel firm, which is seeking an exemption from the tariffs.
Robert Weatherbee, Allegheny Technologies CEO, said this week ATI needs the exemptions for nickel-bearing stainless steel slabs from Indonesia, which is uses for its stainless steel plant in Midland, Beaver County. Without those exemptions, the plant may be forced to close within months because of higher production costs, Weatherbee said.
The Trump administration last April rejected a similar exemption request.
Tariff supporters
From the perspective of the American Iron and Steel Institute, a trade group based in Washington, D.C., Trump’s use of the Section 232 trade remedy “has helped create a more favorable climate for steel, with imports declining and shipments and production rising since the tariffs’ implementation,” said Lisa Harrison, a vice president for AISI.
Imports make up a smaller part of the steel market, Harrison said, even though that has softened in the last few months. The U.S. imported 24.7 million metric tons of steel for the first 10 months of 2019, down 16 percent for the same period in 2018, according to the Census Bureau. Imports in 2017 were even higher, reaching 34.6 million metric tons, according to the U.S. International Trade Administration.
As an indication of the success of the tariffs, shipments of U.S. steel mill products were higher in 2018 than in 2017 and are up for 2019, compared to the same period in 2017, Harrison said. Several idled steel mills have been restarted, and American producers have announced plans to invest in new steel making capacity, she added.
While the current utilization rates of the steel mills are improving, they are still far below the rates in the decade prior to the great recession, Harrison said. Global steel overcapacity continues to be driven by unfair trade practices, government-owned and controlled steel industries, and other trade distortions, she noted.
President Trump drew praise from Ted Bush, national field coordinator for the non-profit Coalition for a Prosperous America, who praised the tariffs on steel.
“Mr. Trump is correcting our trade problems,” Bush said.
Joe Napsha is a Tribune-Review staff writer. You can contact Joe at 724-836-5252, [email protected] or via Twitter .
Joe Napsha | Tribune-Review
Steel bars are piled up at Laurel Custom Grating LLC in Everson, waiting to be cut and shaped into grating for roads and bridges.
Joe Napsha | Tribune-Review
Joe Napsha | Tribune-Review
A stack of steel grating at Laurel Custom Grating LLC of Everson.
Joe Napsha | Tribune-Review
Steel wire is piled up in rolls at Fayette Custom Wire Products LLC in Scottdale.
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