June 25, 2021 at 5:00 am ET
Despite strengthening in the first quarter of 2021, important sectors in the U.S. economy still have a long way to go, especially the iron and steel industry. The opposite is true in China: Its strong rebound drove iron-ore prices to a seven-year high. China alone accounted for nearly 60 percent of all steel produced globally in 2020.
As the Biden administration finalizes its China and trade policy reviews and aspires to lead on climate change, it is important that the nearly 2 million domestic jobs supported by the iron and steel industry are part of the solution, including roughly 75,000 in Alabama where our company operates.
The American steel industry is experiencing what some are calling a “Covid bubble,” but this may prove to be temporary. When construction and manufacturing slowed last year, domestic demand for stainless steel followed suit, bottoming out in June at 156,000 tons – a 35 percent drop from the pre-COVID peak in March. In response, U.S. stainless steel producers made painful but necessary decisions to survive, including cutting production, idling facilities and, in some instances, laying off workers.
While stainless steel demand slowly rebounds with more signs of a sustained economic recovery, it was still below pre-pandemic levels as of March 2021. The only backstop protecting the industry and ensuring a path to viability are the Section 232 tariffs that have strong bipartisan support.
That is why it is critical for the Biden administration to resist calls to reverse or ease these tariffs. Doing so would threaten the recovery and hurt the 190,000 workers in Pennsylvania whose jobs are directly or indirectly supported by the industry. It would also be a retreat from global climate change leadership as it would penalize the American steel industry, one of the cleanest and least carbon intensive in the world. Big polluters — including Asian manufacturers whose CO2 emissions per ton of stainless steel produced are four to five times higher than its American counterparts — would rejoice.
Commerce Secretary Gina Raimondo and United States Trade Representative Katherine Tai are right that tariffs worked well. Now is not the time to change course. Following similar economic downturns in the past, the United States became a dumping ground for subsidized foreign steel. Global steel overcapacity is more than 625 million metric tons – more than five times the total annual capacity of the entire U.S. industry.
Countries like China and others with carbon-belching steel industries continue to expand capacity and production despite declines in global demand, destabilizing the market and leading to periodic import surges which threaten America’s steel industry. China continues to subsidize massive new dirty capacity outside of the country, including Indonesia.
If that weren’t enough, China doubles down with nonmarket practices related to important stainless-steel production inputs like nickel and scrap — key materials for clean U.S. production — and attempts to end-run the tariffs to drive U.S. stainless steel producers out of production. China-based Tsingshan, with its strong ties to the Chinese government and the defense industrial complex, is the world’s largest producer of stainless steel.
From 2017 through the suspension of its now-defunct U.S. joint venture, Tsingshan dumped cheap semi-finished stainless-steel products from its mill in Indonesia into the United States at nearly $1,000 below the global market price, despite Section 232 tariffs. Although Tsingshan apparently has yet to find a new U.S. purchaser for its stainless-steel slab, the potential for a ricochet effect looms as Tsingshan’s slab exports could shift to another Asian supplier country, oversaturating that market and causing those producers to re-orient exports toward the United States.
This is a global issue. Steel from Chinese offshore production is already destabilizing the European market, which is a good lesson for U.S. policymakers. While the U.S. Department of Commerce has prevented underpriced Chinese steel from flooding the U.S. market by denying Section 232 exclusion requests, these Chinese-made imports could simply be imported from other Asian supplier countries – resembling a global game of whack-a-mole and adversely impacting American production, investment and jobs.
This international problem is a good opportunity for the Biden administration to demonstrate its commitment to multilateralism by engaging our foreign partners. For example, the U.S. government should work together with the E.U. on the World Trade Organization challenge to the Indonesian nickel export ban – in addition to addressing substantive solutions to the global overcapacity crisis in steel and other trade distortions.
A commercially viable domestic steel industry is essential to meeting the nation’s national security and critical infrastructure needs, growing our manufacturing base and addressing climate change — all priorities of the administration. If these tariffs are reversed, history will repeat itself and a torrent of dumped steel will flood the market just as the economy is recovering. If that happens, the American steel industry, millions of American workers and our climate change leadership position will suffer.
Tamara Weinert is president of Business for the Americas at Outokumpu and has been a member of the company’s leadership team since October 2020, following senior positions in finance, sales and investor relations; before joining the company, she held leading positions in European energy sector companies.
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