The benchmark hot-rolled coil is up 60 percent in the United States (U.S.) and 34 percent in Europe this year. However, the indices available on World Steel Prices show that the world composite steel price per tonne is down significantly across the board from last year.
Final rate decisions on the tariffs are expected the end of July 2016.
The U.S. has imposed a 266 percent tariff on cold-rolled steel from China (including lesser tariffs – 4 to 71 percent – for Brazil, India, South Korea, Russia, Japan, and the United Kingdom) and a 210 percent tariff on corrosion resistant steel from China (again lesser – 4 to 49 percent – for India, Italy, Korea and Taiwan). The idea being that these countries, primarily China, have flooded the U.S. market with low cost steel. The tariffs, in theory, will allow U.S. steel suppliers to raise prices immediately. Final rate decisions on the tariffs are expected the end of July 2016.
What does this mean for the construction industry? It is likely too early to tell, but some increase in certain areas is highly likely. We can look at a few different cases to attempt to forecast impacts. In March 2002, there was a 30 percent tariff that caused:
- a domestic steel price increase of 50 to 80 percent
- a 30 percent increase from March-June
- a steel shortage, further increasing prices for consumers
Reviewing high level data on SteelBenchmarker™ shows the volatility of steel over the past 15 years as well as recent hikes. Pricing has been low for some time and increases were expected with or without the tariffs. They may just speed up the process and push the pinnacle to higher than expected.
I queried a large steel erection firm in the Twin Cities market asking for its input and received feedback stating, generally, that:
- increases are softening
- demand is down
- a gradual increase is inevitable
- pricing is likely to remain flat through 2016
- a temporary hike in pricing would lower demand, potentially offsetting future hikes
Correspondence with other firms seems contradictory. Discussions with different Midwest and East Coast construction management firms indicate structural steel remaining relatively flat, while cold-formed metal framing is likely to increase dramatically (as much as 15 percent per quarter for the balance of 2016 and perhaps beyond).
There seems to be a lot of evidence supporting increases in the near term and industry consultants need to advise clients of the potential risks associated with their projects and programs.
It is too early to tell what effects, if any, tariffs may have on the construction industry. There seems to be a lot of evidence supporting increases in the near term and industry consultants need to advise clients of the potential risks associated with their projects and programs. The best bet is to plan for substantial increases and keep aware of the situation.
Preliminary research appears to indicate that only subsets of construction related steel will see an increase (cold-formed metal framing and the like) while others (structural steel) will see a gradual increase back toward historical norms.
For now, the best advice may be to carry a contingency or temporary escalation factor on steel related work and advise clients that the situation is being constantly monitored. China is far and away the largest steel producer in the world, so consequences of the tariffs seem likely, it's just too soon to tell what they'll be.