AWC Industries Blog

posted by Frank Wilson on Thursday, 05 April 2018 in Metal Fabrication

Metal Fabrication Faces Uncertainty Over Steel and Aluminum Tax

AWC Industries shares an article by Jade McDowell regarding the recently proposed steel tax by the Trump administration.

Source: East Oregonian.

‘New tariffs on steel and aluminum have been suspended for several of the United States’ biggest trading partners until May as details are being worked out, leaving many economists and industries still guessing on what the final impacts will be.

“It’s one of those ‘you’re going to have to kind of wait and see’ cases,” said Dallas Fridley, regional economist for the Oregon Employment Department.

The tariffs, announced by President Donald Trump in March, impose a 25 percent tax on imported steel and 10 percent tax on imported aluminum. The European Union, Brazil, Argentina, Australia, South Korea, Canada and Mexico have all received temporary exemptions until May 1 in exchange for meeting certain conditions, including quotas on exports to the U.S. The Washington Post reported the exemptions granted so far represent about half of all steel imports into the United States.

Fridley, an employment economist, said any industry that uses steel or aluminum could be affected by higher prices. That ranges from local construction firms to farm equipment manufacturers to brewers who use aluminum cans for packaging.

One industry directly affected is metal fabrication. Aaron Karlson, general manager of NW Metal Fabricators in Hermiston, said talk of the tariffs has made the steel and aluminum markets extremely volatile for the past few months. While suppliers usually let their quotes on steel and aluminum stand for at least a week, Karlson said lately they have been telling metal fabricators that any quote is only good for one day due to rapidly fluctuating prices.

“Trying to get our customers to say yea or nay on a project in a day is difficult,” Karlson said.

While a farmer bringing in a broken piece of equipment might be able to give approval that quickly, many of NW Metal Fabricators’ customers are larger companies like food processing plants that can’t go through all the needed approval processes in a day. That leaves NW Metal Fabricators and the customer trying to guess where prices might be a few days later.

He said they’ve seen on average a 20 to 25 percent increase in pricing, too. The turmoil in the markets has also caused delays in the metal arriving from the supplier.

If those delays get worse, Karlson said, a manufacturing or food processing plant in the area that went down due to a broken machine could take longer to get up and running again.

However, as more and more exemptions have been granted, there is some sense that things could settle down.

“It seemed like a huge deal at first, but now the stuff I’m seeing seems like there’s hope it might work itself out,” Karlson said.

The construction industry is also waiting to see if things work themselves out. John Eckhardt from Knerr Construction in Hermiston said the past few weeks the company has been working on wood-framing projects, so they haven’t seen much of an effect.

“I haven’t seen it hit yet but I’m sure it’s coming,” he said.

Eckhardt said rapidly fluctuating markets would make it harder for construction companies to accurately bid on projects that involve a lot of steel, and increases in raw material costs drive up construction costs, but at the moment it’s hard to tell what the final effects of the tariffs will be.

“Now it’s speculative,” he said.

According to a recent report by the U.S. Department of Commerce, the U.S. is the world’s largest importer of steel, importing 34.6 million metric tons of it in 2017. Canada was the top exporter, at 17 percent, with Brazil and South Korea following. About half the steel imported to the United States is used for construction of buildings and infrastructure.

In looking at how the labor market in the region might be affected by the tariffs, Fridley said one of the biggest industries he could think of in Umatilla County that would likely be affected if the tariffs raise steel and aluminum prices is the travel trailer industry, which uses metal in its construction of trailers.

Keystone RV’s manufacturing plant is one of the largest employers in Pendleton. The Pendleton plant referred questions to the corporate office in Indiana, which did not return requests for comment.

According to data provided by Fridley showing the number of people employed in Umatilla County in 2016, there were 3,478 jobs in the manufacturing industry and 986 jobs in the construction industry.

While some industries are bracing for a negative impact due to price increases, the tariffs are expected to be beneficial for the U.S. steel and aluminum industries. The Associated Press reported that the U.S. steel industry employs 143,000 people nationwide and earned more than $2.8 billion last year. Giving those industries some breathing room from competition from foreign suppliers is expected to lead to the creation of new jobs in the industry.

On the other hand, there is fear the tariffs will set off a trade war that will end up negatively affecting many industries, including agriculture. Oregon exported $21.9 billion in products to other countries in 2017, according to the International Trade Administration.’

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