The 25% tariff on imported steel and the 10% tariff on imported aluminum went into effect on March 23, 2018. Temporary exemptions were made, and recently extended until June 1, for Canada, Mexico and the European Union to allow for further negotiations. Agreements-in-principle have been reached with Argentina, Australia and Brazil, with the details of the agreements being finalized.
With negotiations still underway, it is too early to tell the direct impact the tariffs will have on the construction industry, but an increase in the price of steel is expected. This is not the first time the U.S. has experimented with large steel tariffs. In 2002, tariffs of up to 30% were imposed on steel imports in an effort to temporarily level the playing field against low-cost imports. The three-year tariff was withdrawn after only 21 months as consumers of steel, primarily in the construction and automotive industries, lobbied against them due to negative economic consequences.
Reviewing data over the past 15 years displays the volatility that steel prices can experience in response to global pressures.
Current prices have been increasing for more than a year after a period of historically low prices; there is no reason to believe this trend will change in the short term after the implementation of tariffs. Steelbenchmarker* currently lists the price of hot-rolled band at $811.00 per ton, which is an increase of more than 25% since it began the year at roughly $658.00 per ton. Other notable price increases include:
- Cold-rolled coil at $944.00 per ton, a 15% increase since it began the year at $817.00 per ton
- Standard plate at $879.00 per ton, up more than 20% from the beginning of the year when it was at $713.00 per ton
- Rebar at $699.00 per ton, a 15% increase from where it began the year at $601.00* per ton
The overall evidence suggests that the price of steel has rebounded since its multi-year low in 2015 and has shown strength in the last year. We can expect volatility in the short term as negotiations continue, so it’s good to stay up-to-date on any news regarding the tariffs. Feedback from vendors supports this price action, indicating several expectations:
- A short-term supply shortage, as large steel consumers have locked in supply before tariffs
- An immediate 5% increase in the price of steel products
- Price volatility in the short term
It is still very early to determine the effects, if any, that tariffs may have on the construction industry. However, there is evidence supporting increases in the near term.
Faithful+Gould recommends clients monitor both the evolving legislation and the potential risks associated with their projects and programs.
To cover the short-term volatility, we recommend carrying a 5-7% contingency on the cost of steel and aluminum materials on imminent projects that have not yet bought out steel or aluminum.
We will continue to monitor the situation and how it impacts the construction industry.
For any specific questions or concerns, please email Construction.Intelligence@fgould.com.
*Source: Prices and percentage increases for the hot-rolled, cold-rolled, standard plate and rebar are provided in the Steelbenchmarker Price History - http://steelbenchmarker.com/files/history.pdf