OT: steel tariffs and how they'll affect you

Curious to hear your thoughts. I'll be making my first payment to the "revive our steel industry!" fund tomorrow to the tune of a couple hundred bucks per what the same material cost a few weeks ago. From what my supplier is telling me, the tariffs are going to cost me several hundred dollars (minimum)this month alone, in costs I can't really pass along to my customers at this time. Plus, that was Friday's info; he said costs could go up even more tomorrow (4/2) as it's the start of the month.

I'm all for Americans making solid livings and I hope the US steel industry undergoes a revival. Not real happy it's hammering US so specifically, though. Your thoughts on the tariffs?

My steel supplier is a good friend's neighbor. Tells me steel has gone up 10-38% and on average 20% overall.

For me, the prices are nowhere near as high as when I first entered manufacturing and set my pricing based on retail.

the tariffs on steel and aluminum, as "rolled out" by this administration, are simply put, a disaster for American manufacturing.

basic commodities markets, in particular, rely on a certain degree of predictability, as do the industries that consume them to price their products to be competitive in a global market.

not since the OPEC oil embargo has one single decision jerked around a basic commodity to this extent in this country, that I can recall. some of us remember the effect that had on the entire economy. not saying it is the same, but just something to think about.

having said that, let me make it perfectly clear that I STRONGLY support domestic industry, and spend a lot more of my own money to buy products from the USA, Canada, and other countries which have well established regulatory frameworks so that I have a reasonable expectation that what I am buying is what it says it is, and it wasn't produced with child, prisoner, or slave labor.

in short, I am neither a "pure free trader" or a "knee-jerk protectionist".

tariffs and duties have a role, and should be strengthened, but the rules and standards for them should be crystal clear, predictable, and subject to careful review.

(also an emerging disaster for many American farmers, with the Chinese retaliatory tariffs starting now on pork (25%), fruits, nuts, and wine.)

Tariffs are prob only indirectly responsible for Long Tom's increased costs. Most likely, the steel he purchased was already in stock at the supplier, but the supplier raised Tom's cost in response to the tariff, even though the supplier's original cost was much less. Tidy little nugget of profit for the supplier.

neilho said:

Tariffs are prob only indirectly responsible for Long Tom's increased costs. Most likely, the steel he purchased was already in stock at the supplier, but the supplier raised Tom's cost in response to the tariff, even though the supplier's original cost was much less. Tidy little nugget of profit for the supplier.

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The flip side of that, of course, is eventually once these nonsense tariffs are repealed, the supplier will then have an entire inventory that he bought at the tariff trading price and won't be able to charge folks more just because it's what he has in stock.

Presumably the price paid by the scrap yards is increasing commensurately?

metalmagpie said:

Presumably the price paid by the scrap yards is increasing commensurately?

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Now that is some funny stuff right there

register said:

The flip side of that, of course, is eventually once these nonsense tariffs are repealed, the supplier will then have an entire inventory that he bought at the tariff trading price and won't be able to charge folks more just because it's what he has in stock.

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Not to worry -- if history is a guide, the market price will relax back to pre-tariff levels far, far slower than they spiked up when the tariffs were announced.

Regards.

Mike

metalmagpie said:

Presumably the price paid by the scrap yards is increasing commensurately?

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actually, China just slapped a 25% tariff on scrap aluminum imports, so if you rely on scrapping the chips, drops, or offcuts to turn a profit on manufactured aluminum items, you may really get screwed, coming and going.

When the tariffs were being proposed, I really didn't care since we do not use any imported material. WRONG. We use 7075 plate in the 3" to 8" range. I'm being quoted about 70% higher than 2-3 weeks ago. And delivery has gone from a couple days to a few weeks. So a $1000 blank is now a $1700 blank. So for a 10 piece order, that's an extra $7k I've got to pull out of my ass.

Thanks a lot

cyanidekid said:

actually, China just slapped a 25% tariff on scrap aluminum imports, so if you rely on scrapping the chips, drops, or offcuts to turn a profit on manufactured aluminum items, you may really get screwed, coming and going.

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(My Bold Italics) ...unfortunately Cyanide, IME life is like that, ......and when politicians get involved ;- it's worse

First, good job keeping it on the rails so far guys. I meant to say in my OP that I hoped we could simply talk about the policy itself and not devolve into a broader or more personal political argument.

I'm waiting on a call back from my guy as to what if anything might have changed as of 4/1. Kinda bracing myself.

What I'm trying to wrap my brain around is the money flow itself and who that helps and how and why. So far, I've got this:

- we in the metalworking industry are at the leading edge of this. The tariff money is collected by the government- correct?- and is not specifically earmarked for any purpose. So, the extra couple hundred dollars I'm going to pay out later today is in effect going to the federal government "money bonfire". Greeeaaat. Please correct me if I'm wrong there.

- while this increased cost will eventually be passed along in whole or part by us metalworkers to our customers, in the early stages of this it's essentially a money suck from the metal and metalworking industry. The suck direction is from us, to the Feds. Correct? This is bothersome. Why should MY industry get a damper put on it to help another industry?! Higher metal prices come straight out of our pockets, first, and second can and in some cases WILL result in customers reducing orders. That hurts. Why is it fair to do this to us to benefit another?

- while this is not a tax per se, it sure looks, feels, and smells like one. Doesn't it? I'm paying money that goes to the US Government.

- As the effect spreads out into the broader economy, everything made of steel or aluminum will go up in price at the consumer level as our customers (I'm assuming most of you make parts/products for other businesses who then sell to the public) pass this price increase along. So eventually, this will amount to a tax on everyone, not just us. We'll just bear the brunt until we can renegotiate our bids and contracts and less formal business agreements. Correct so far?

-the higher prices will, it is hoped, give our native steel and aluminum industries a chance to compete and, one hopes, grow and thrive. Complete with high-quality jobs. Happy shining people, etc.

- a healthier native steel and aluminum industry will benefit America from a national security standpoint. However, I'm flailing a bit at this point trying to see how prices ever go back down. Do they? Or are we just going to build higher prices on this basic commodity into our economy structurally? In that case, things will just plain cost more. How does that benefit the average American?

- aren't higher prices another way of saying "inflation"?

In summary I'm seeing an extraction of money from the citizenry to the US Government but without ANY of the mechanisms typically employed to "target" those funds in an intelligent way. For instance, if this was instead a good ol' "tax and subsidize" play, at least there'd be some debate on it and at least there'd be some effort to actually aim the collected money at the problem. This bothers me.

Guys I'm truly interested in broadening my point of view here, not looking to just gripe or moan. So any corrections to MY thoughts above are very much welcomed. Thank you.

cyanidekid said:

actually, China just slapped a 25% tariff on scrap aluminum imports, so if you rely on scrapping the chips, drops, or offcuts to turn a profit on manufactured aluminum items, you may really get screwed, coming and going.

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What we need to do is form a syndicate, buy a bauxite mine and a smelting/rolling mill, and make our own Al products. We pay discounted pricing graded on our ownership stakes, and charge "outsiders" market rates. We'll own the means of production and bring the Capitalist pigs to their knees! Viva la Revolution!

supply and demand and price often reflect little on actual costs. even a junk yard will buy and sell at daily varying prices. your free to go to different junk yard or hold on to scrap and wait for better price. same with buying metal your free to wait for better price.
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its same with currency exchange rates. often value of US dollar has very little to do with its actual value. many will wait months or longer for better prices. even banks when sending payments overseas will often wait til last minute to transfer
convert currencies trying to get a extra 1% profit.
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i remember in China trying to buy a Dremel electric vibrating engraver. price was $100. so i go to other stores to find lower price. i come back to store and price was $110. cause they figured i found nobody cheaper. ultimately cheaper to order it on internet and have one sent by mail from other side of the world if i could afford to wait a week. i ordered sawsall blades that way cause local store wanted over 200% more than what i could just buy them for and have sent from other side of the world. i could afford to wait the extra week
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always cheaper to buy in bulk and wait weeks or months for lower price. when you buy in small quantities and are in a hurry you are at the mercy of the supplier who will charge the maximum they can get away with
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there are countries where toilet paper is in short supply cause people hear price going up so they buy extra while they figure price is lower than it will be next week or next month. metal price speculation similar to currency speculation. often people buy extra create shortages cause they hear price will go even higher next month

What we are finding is that we have been almost getting unknowingly duped. I try to buy American materials when possible, for several reasons. In doing so, we have come to patronize a number of the vendors that we bought those specific materials from, for other needs as well. Turns out that while they never really said ( and I never specifically asked ) that it was American materials like the others, the fact of the matter is that they have been peddling chinese materials. This sheds some light and curiosity into a few of the material issues we have had over time.

Long story short, a few of our vendors went from next day delivery ( or even same day pickup ) to a minimum 5 day wait, often now 7-10 days. Pricing has doubled, if not tripled. But here's the rub - not because they are now buying American. Because they have continued to purchase chinese.

One has to wonder why. Is it a sudden demand issue? Is it an attempt to continue with greed? It has not affected us deeply simply because we run lean on materials. They are ordered for the jobs as they come in.

I go out of my way both personally and professionally to purchase American made goods. I am completely fine with paying more for an equally made American product. And obviously, I'm fine with paying more for a better made product. As such, I am hoping that the industry responds with product that is made in America and better for less than the tariffs have increased the chinese materials to, but am willing to pay more than them.

What I am not willing to do is pay 3x - 4x ( or more ) for something that was increased by 15% - 25%!!!

Zahnrad Kopf said:

But here's the rub - not because they are now buying American. Because they have continued to purchase chinese.

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How do you know that?

Tariffs raise the price of both the US commodity AND the imported commodity being sold, that is the whole point of a tariff.

price goes up cause people buying extra creating shortages.
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1) they buy extra now cause they want to secure a supply now to last some time.
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2) they fear price will go even higher next week or next month
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no different than shortages of toilet paper cause people buying 10x more than normal fearing price will be higher next month. takes weeks to months for factories to increase production to catch up to demand. factories often hesitate to increase production cause 3 months from now price might crash to record lows.

gkoenig said:

How do you know that?

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Because I inquired specifically and was told as much by people privy to the knowledge. If it were speculation on my part I would have said as much.

I went to Shapiro supply in St louis this morning 4-2 -18. The sign said "steel prices are up it is beyond our control". I bought a chunk of 3x3 cold rolled that had probably been sitting there for a year or so .I payed $3.50 lb.As soon as someone hollers price increase ,everyone jumps on the train. Oh well that's capitalism.I guess we all do it. Edwin Dirnbeck