Steel prices are soaring in anticipation of the Section 232 tariffs of 25 percent across the board that the Trump administration said it would impose.
Hot-rolled steel is selling for more than $800 a ton, up from around $650 a ton in December, said Charles Allen Bradford, a steel analyst with Bradford Research, Inc.
Amid of a flood of imports, the steel industry has long suffered from low prices that have crippled profitability, which resulted in widespread layoffs and mill idlings in 2015. Hot-rolled steel prices have dipped to as low as $374 a ton in 2015, according to Steel Benchmarker, a steel industry data site.
Tariffs will raise the price of imports and restrict supply in a boost to domestic steelmakers, Bradford said.
"Basically, the steel companies are all going to make a lot of money," Bradford said.
Steelmakers may face increased costs if prices of raw materials like iron ore and scrap metal rise accordingly, he said.
"The companies should still be making a lot of money," he said. "If steel prices go up by $100 a ton and scrap rises by $20 a ton, the average steel profit margin still increased by $80 a ton."
Steelmakers may bring more capacity back online to meet demand, such as the U.S. Steel Granite Works in southern Illinois near St. Louis, Bradford said. It will also put steelworkers in a position of strength during contract negotiations this summer, since the steelmakers will be doing well financially.
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Indiana University professor Keith Belton, the director of the School of Public and Environmental Affairs’ Manufacturing Policy Initiative, said the administration was considering a step far more sweeping than past tariffs, which target individual countries or foreign steel companies that have violated international trade rules.
As of 2017, the United States imposed more than 190 steel tariffs, as high as 500 percent on Chinese-made steel, according to the Congressional Steel Caucus. An additional 25 percent would be applied to any and all imports of steel products.
"It's going to help steel producers, allowing them to face less competition from imports," Belton said. "They'll benefit and make more money, while the users of steel products and consumers will pay a little more."
The Elgin-based Fabricators and Manufacturers Association expressed fears that tariffs of 25 percent on steel and 10 percent on aluminum would result in the imports of more finished product made abroad with cheaper foreign steel.
“One likely result of this action is to add headwinds to the market for American-made fabricated metal product producers. Just when this market had some sustained momentum, the specter of retaliatory duties and tariffs now hangs over this important manufacturing sector," said Ed Youdell, CEO And president of the Fabricators and Manufacturers Association. "The association is concerned that jobs and job creation are at risk. Those countries affected by this announcement will likely choose to circumvent the tariffs by producing and exporting low-cost fabricated metal parts rather than exporting steel and aluminum."
Phil Kooima, president of the Iowa-based agricultural machinery fabricating firm Kooima Co., said metal fabrication jobs were at stake.
"This proposed tariff will disproportionately harm U.S. metal fabricators," he said. "Rising steel costs at home, but not in the world market, favors the importing of fabricated metal products from overseas suppliers. A better policy would be to import low-cost steel coil and plate and produce the fabricated products here in America. There are many more fabricating jobs here in U.S. than steel mill jobs so it is disappointing to have the president choose to help one industry over another."