U.S. steel, aluminum tariffs expected to hurt Port of NOLA and Louisiana

12th March 2018   ·   0 Comments

By Susan Buchanan
Contributing Writer

Steel and aluminum tariffs, authorized by President Donald Trump on Thursday, will take their toll on Louisiana’s economy, Port NOLA officers and others predicted last week. Trump placed tariffs of 25 percent on steel imports and 10 percent on aluminum under Section 232 of a 1960s trade law that allows levies to be imposed, without approval from Congress, to protect national security.

According to a U.S. Commerce Department study released in February, waning domestic steel and aluminum output impacts the nation’s production of military aircraft, Navy vessels and other defense assets.

U.S. steel output has declined since the early 1970s, and primary aluminum production has fallen since the late 1970s. When Trump was elected, steel producers and workers asked him for protection against imports and from overcapacity in China. Canada is the top U.S. supplier of steel, and Mexico is fourth, while China is only eleventh. But China’s excess capacity is substantial.

North American Free Trade Agreement partners Canada and Mexico will be exempted from the new levies for now, while negotiations on a new NAFTA deal continue, Trump said Thursday. Steel and aluminum tariffs for countries could be lowered or removed if their shipments no longer threaten U.S. security, he said. Trump hinted that Australia, which runs a trade deficit with the United States, might be exempted.

What’s at stake in Louisiana? “The Port of New Orleans is a big steel importer so stevedore jobs and port revenue will be affected,” economist Loren Scott, emeritus professor at Louisiana State University, said last week. “The state’s oil and gas industry uses lots of steel, especially in the Gulf for drill pipes, platforms and spars. And $85 billion in announced projects in Louisiana, particularly chemical plants, that are in the FEED or Front-End Engineering Design stage now, need steel. Those plants can locate elsewhere if they want to.”

“Any U.S. industry that uses steel is a loser,” Scott said. “And for consumers, prices of homes, cars and appliances will increase. Countries hit by tariffs will retaliate, getting us into a trade war that could make this country’s 2009 recession seem like nothing.” The Smoot–Hawley Tariff Act in 1930 contributed to the Great Depression, he said. The act raised U.S. tariffs on over 20,000 imports and caused this nation’s exports to shrink.

Trump followed through on a campaign promise when he imposed tariffs last week. “But a trade war could undo any benefits from his recent tax reforms and industrial deregulation,” Scott said. “Bottom line, unless you’re in steel or aluminum, these tariffs are very bad economic policy. You can’t put lipstick on a pig.”

“We have three steel producers that I know of in the state—Nucor, Benteler and Bayou Steel,” Scott said. Louisiana also has steel fabricators. “Steel producers win from this tariff, and steel fabricators lose,” he said.

North Carolina-based Nucor Corporation, the nation’s largest steel maker, runs a plant in Convent in St. James Parish that relies on natural gas to make steel pellets from iron ore. Nucor subsidiaries operate in Slidell and Mandeville. Austria-based Benteler has a steel and tube mill at the Port of Caddo-Bossier near Shreveport, while Bayou Steel operates in LaPlace in St. John the Baptist Parish.

As for New Orleans, it’s third in the nation for steel imports, behind Houston and Mobile, Port NOLA spokesman Donnell Jackson said last week. In fiscal 2017, Port NOLA brought in 2.48 million tons of steel, accounting for 83 percent of its break-bulk tonnage and 30 percent of its total general cargo. The port took in 665,154 tons of aluminum traded on the London Metals Exchange in fiscal 2017.

Asked about tariffs placed by Trump on Canadian lumber last spring, Jackson said they haven’t affected the port.

Imposing tariffs arbitrarily on steel and aluminum will hurt ports, the larger maritime community and steel-consuming industries, Brandy Christian, president and CEO of Port NOLA, said. In 2003, the port’s steel imports fell 46 percent after President George W. Bush put tariffs on various, imported steel products from a limited list of countries under Section 201 of the Trade Act of 1974, she said.

“The reaction of other countries and their desire to retaliate against U.S. exports is a concern for Port NOLA and ports along the Lower Mississippi River,” Christian said. “Louisiana is a leader in exporting the nation’s agricultural products overseas, with a nearly 60 percent market share of export grain from the U.S. Midwest,” she said. Worries are that steel-shipping nations could retaliate by buying less American wheat and corn. Port NOLA supports free and open trade policies, along with appropriate incentives for U.S. steel producers, as best for all sectors of the nation’s economy, she said.

At Port Houston, the top North American steel terminal, executive director Roger Guenther said steel cargo volumes are growing. “But our history shows that steel cargo immediately declined following a previous tariff increase,” he said. Port Houston officials fret that the 25-percent tariff on steel will hurt cargo volume, impacting local jobs and the economy. These new tariffs need further review, Guenther said.

As to how tariffs might affect construction costs for Louisiana’s highways, bridges and facilities, Shauna Sanford, spokeswoman for Governor John Bel Edwards, said potential impacts are being studied at this time. And Craig Belden, spokesman for New Orleans Mayor Mitch Landrieu, said it’s too early to tell whether any of the city’s construction contracts will have to be renegotiated.

In early March, Randy Noel, chairman of the National Association of Home Builders and a developer in LaPlace, said tariffs on steel and aluminum imports will mean higher costs for home builders. “Given that home builders are already grappling with 20 percent tariffs on Canadian softwood lumber, and that prices of lumber and other key building materials are near record highs, this announcement couldn’t have come at a worse time,” he said.

In a February 16 report, the U.S. Department of Commerce looked at how imported steel mill products and aluminum affect national security, including military needs. The United States is the world’s largest steel importer, bringing in nearly four times the size of its exports. Steel furnaces have closed, leaving the domestic industry’s jobs down 35 percent since 1998, Commerce said. Canada, Brazil, South Korea, Mexico and Russia are the top U.S. steel suppliers, with China eleventh on the list. China, however, is the biggest steel producer and exporter globally.

In the report’s proposed remedies, a tariff of at least 24 percent on steel imports from all countries should increase domestic steel production from 73 percent of capacity now to about 80 percent, which Commerce said is necessary for the industry’s viability.

The Commerce Department estimated that a tariff of at least 7.7 percent on aluminum imports from all countries would raise that metal’s U.S. output from a 48-percent average capacity now to 80 percent. As the nation’s aluminum smelters shut down from 2013 to 2016, the industry’s employment shrank 58 percent. Meanwhile, U.S. aluminum demand has swelled. Transportation, containers and packaging, and construction are the big users. Automakers require more aluminum now to produce lighter, fuel-efficient cars. Aluminum is usually more expensive than steel, but it’s about 40 percent lighter. Most of the weight in today’s aircraft is from aluminum.

Only one U.S. producer of the high-quality aluminum alloy that’s needed for military aerospace purposes remains in business, according to the Commerce Department.

Canada, Russia, the United Arab Emirates, Argentina and Qatar are the top U.S. suppliers of unwrought aluminum. But globally, China is the biggest producer of aluminum plates, sheets, strip, foil, and tube and pipe fittings. As of mid-February, the U.S. had two anti-dumping and countervailing duty orders on Chinese aluminum.

Other countries have dumped their steel and aluminum in the United States, leaving our producers to rot and rust, Trump said last Thursday. Meanwhile, Gary Cohn, Trump’s top economic adviser, was unable to support the new tariffs and resigned last week.

This article originally published in the March 12, 2018 print edition of The Louisiana Weekly newspaper.