US Steel Prices Fall, but End Users Are Concerned

US steel prices

We saw a sharp rise in US steel prices in the first half of 2018 primarily due to the Section 232 tariffs. A 25.0% tariff on steel imports provided headroom to US steel companies to raise their selling prices. US Midwest aluminum premiums have also risen after a 10.0% tariff was imposed by President Trump.

US Steel Prices Fall, but End Users Are Concerned

Prices retreat from their highs

US steel prices have retreated from their 2018 highs, followed by aluminum premiums. However, the correction in steel prices has done little to mitigate the concerns of metal end users as the spreads between the US (SPY) and international steel prices are still near record highs. So, US steel and aluminum buyers are paying much more than their peers globally.

Higher costs

Speaking at a company event, Joe Hinrichs, Ford’s (F) president of global operations, noted that US steel prices are the highest in the world. He added that the company had told the Trump administration “that we need to have competitive costs in our market in order to compete around the world.” Other metal end users such as the Coca-Cola Company (KO) have also noted higher input costs after the implementation of the Section 232 tariffs.

Apple (AAPL) and Walmart (WMT) have also warned of price hikes if Chinese goods are slapped with tariffs. President Trump imposed a somewhat softer 10.0% tariff on $200.0 billion in Chinese goods last month amid opposition from several companies.

Section 232 tariffs

The Section 232 steel and aluminum tariffs have been a key bone of contention between the United States and other countries. While the Trump administration renegotiated NAFTA, Canada and Mexico are still subject to these tariffs. However, reports suggest that they might be exempt from the tariffs. We’ll discuss this topic in the final article of this series.