Trump’s buy made-in-America steel to ensure industry remain competitive

FOR ANYMORE trying to figure out what President Donald Trump’s “Buy America” policy means for the domestic steel industry, take a ticket and line up.

Trump last Tuesday signed a “Buy American” order that included a re- affirmation of the White House’s support for a “melted and poured” standard.

The policy would force projects like new, retrofitted and expanded US pipelines to use steel made in the country.

The American Iron and Steel Institute said last Tuesday “the executive order is a positive step in ensuring full enforcement of existing Buy America laws and ensuring the steel industry remains competitive.”

But the lack of details in the “melted and poured” plan, and a penchant for the administration to suddenly pivot on policy, has left some analysts wondering if the order will be implemented.

The policy would have a “somewhat meaningful” impact on the US steel industry, but “I’m kind of sceptical it even happens,” Lee McMillan, an analyst at Clarksons Platou Securities, said in a telephone interview.

It’s also unclear if large- scale construction projects that would benefit the steel industry, like a plan to build a wall along the US-Mexico border, will go ahead, McMillan said.

“To take the time to figure out how much steel it’s going to take to build a wall across Mexico is just not high on people’s list if you assume it’s not going to happen,” he said.

“This is another one that’s kind of like that.”

Not all market players in the US may be on board with the policy.

Pipeline operators oppose the plan because it would increase costs or threaten to delay or cancel projects, according to Michael Kay, a Bloomberg Intelligence analyst.

What’s more, the regulatory path could stretch into 2018 because it would require public input and agency reviews, according to BI’s Caitlin Webber. In addition to push-back on the policy, it would probably fall victim to a challenge at the World Trade Organisation, she said.

Projects that are currently in the works may also get certain exemptions. About half of the Keystone XL pipeline, which would transport Alberta oilsands crude to US refineries, was set to be built with steel fabricated in the US, according to a 2012 breakdown from TransCanada Corp. of an earlier version of the project.

In March, after the Trump administration authorised the project, the company agreed to increase the amount of US steel in the pipeline, with the details to be decided later.

The “Buy American” initiative is being debated at a time when steel makers in the Americas just capped their best collective stock performance since 2003 following a raft of successful trade cases levying tariffs against foreign metal.

Domestic hot-rolled coil, a steel benchmark, rose 55 per cent last year, the most since at least 2007.

The executive action includes a “Hire American” clause that ordered the review of H-1B visa programmes to favour more skilled and highly paid applicants.

The hiring aspect of the policy may also negatively affect the steel industry, said Gordon Johnson, an analyst at Axiom Capital Management.

“We see Mr Trump’s ‘ Hire American’ initiative likely driving up the cost to make steel in the US, a likely headwind for domestic mills,” Johnson said Tuesday in a note to investors. — WP-Bloomberg