U.S. Steel announced it will temporarily halt production at two domestic plants despite the boost from tariffs imposed by President Donald Trump's administration, as a steel industry singled out for federal support shows signs of weakening.
On Tuesday, U.S. Steel said it would temporarily halt operations at a blast furnace near Detroit as well as one in Gary, Ind., on the shore of Lake Michigan. U.S. Steel will be idling a third plant in Europe, the company said.
The closure runs in contrast to the narrative Trump has offered about the steel industry. On Tuesday night in Orlando, Fla., as he formally announced he was running for re-election, Trump boasted about helping the steel industry through the use of tariffs on imports.
"Thanks to our tariffs, American steel mills are roaring back to life, you know that," he said.
The moves come amid broader concerns about a slowdown in the steel industry, which threatens to derail a key economic priority of the Trump administration. Despite initially surging under the tariffs, steel prices have fallen dramatically because of weakening demand from key consumers, including the auto industry, energy industry and agricultural industry, said Phil Gibbs, a steel industry analyst at KeyBanc Capital Markets.
Prices of hot-rolled coil -- a key metric of steel prices -- have fallen from their peak last year of $900 a short ton to less than $600 a short ton, said James Moss, a steel industry consultant at Pittsburgh-based First River Consulting.
"At the moment, the market is a little sideways," Moss said.
Falling steel prices in the U.S. are partly caused by worries of a glut from new capacity planned for the coming years. Major U.S. producers that had announced expansions or restarts include Nucor Corp., Steel Dynamics Inc., Commercial Metals Co., as well as U.S. Steel.
U.S. Steel shares rose 4% in Wednesday trading, despite the company missing Wall Street's expectations for its second-quarter guidance.
Rival manufacturer AK Steel Holding Corp. added 3.6%, while Nucor gained 3.1%, Commercial Metals was up 1.2% and Steel Dynamics rose 3.9%.
Last year, Trump imposed tariffs of 25% on steel imports and 10% on aluminum imports, citing national security concerns. The tariffs remain in effect for China and most countries, although they have been curbed in a limited number of exceptions, such as for Canada and Mexico.
Trump's tariffs helped the steel industry's resurgence in 2017 and 2018, leading to soaring profits and company plans to restart old plants. With a favorable business climate, contract negotiations last year led U.S. Steel workers to receive their biggest pay increases in years.
Trump celebrated the steel industry's improvement under his administration, calling it a key success story of his tariffs. Last month, he tweeted that "in one year Tariffs have rebuilt our Steel Industry -- it is booming! ... we now have a big and growing industry."
But steel prices have since fallen dramatically from 2018 to 2019, in part because fear of a glut and weakening demand across Europe and in the United States. Luxembourg-based ArcelorMittal also announced last month that it will be idling steel mills in Europe.
Trump's steel tariffs may help curb the competition facing American steel producers in domestic markets, but Chinese steel can still help drive down prices in Europe and in other competitive markets, industry analysts say.
"It can still show up in multiple different places, and not necessarily with the 'China' brand on it," Moss said. "There's a supply component of this which has not gone away, despite the tariffs. "
Trump's steel tariffs are costing U.S. consumers and businesses more than $900,000 a year for every job created, according to a report by the Peterson Institute for International Economics, a think tank that supports free market policies.
Information for this article was contributed by Jeff Stein of The Washington Post and by Joe Deaux, Matt Townsend and Aoyon Ashraf of Bloomberg News.
Business on 06/20/2019