Mar 6, 2017 10:14:55 AM

The American Steel industry has progressed through a turbulent past, littered with legislation and competition from overseas suppliers and imports. 2017 is set to be a ground breaking year and should see a return to profitability and growth for many businesses in the industry – production demands are set to increase, fuelled by a boost in customer demand, and renewed investment in the construction and energy sectors. Furthermore, crude steel output is also set to increase by approximately 4.4% which virtually reverses the previous year's figures.

Questions that arise are: What factors are present that affect steel producers ability to meet this projected increase in demand? How do legislations such as NAFTA and the Buy American Act contribute?  

What is NAFTA and How Does it Affect the Steel Industry?

The North American Free Trade Agreement is a pact that has stood firmly in place between the US, Canada, and Mexico since 1994 and effectively creates a trade bloc between these countries. The end game of NAFTA was to help eliminate trade boundaries between these countries and enable investment to allow businesses better ability to flourish.

For the steel industry, NAFTA has served as a double-edged sword. On the one hand, it helped facilitate the exports into Canada and Mexico; a large part of steel giants capacities such as AK Steel and U.S. Steel were used for exportation. Alternatively, NAFTA also opened up the door for Mexican and Canadian imports which often reduced the need for the supply of steel from those same American businesses. President Donald Trump has highly criticized NAFTA, and its future is currently uncertain – How would a withdrawal from the pact affect the American steel industry and its ability to export its produce?   

Buy American vs. Buy America

How do these two government acts affect the North American steel industry? The “Buy American Act” established by President Hoover in 1933 dictates that the US government must prefer U.S made products when undertaking funded projects. In essence, this has meant that US steel suppliers have been the preferred choice for federal construction programs.

The Buy America provision is a similar piece of legislation that was included in the Surface Transportation Assistance Act created in 1992. This Act applies to federally funded transit programs with a value of over $100,000 and states that projects must have 100% American content for both steel/iron and other manufactured products.

These two acts will support the American steel industry and ensure that U.S steel businesses are prioritized for major future projects.

How Are Chinese Imports Affecting the US industry?

Imports will play a fundamental role in the future of the US steel industry. Throughout the world, Chinese steel imports have flooded the market and vastly altered the landscape of many nations steel industries. Where a nation would traditionally rely on home-grown steel producers, a shift towards using cheaper Chinese imports instead is increasingly apparent. Chinse steel imports have made their way to the US, and have significantly affected our industrial markets. How will the Trump government address the issue of cheap imports? Only time will tell; but this administration could have a bearing on the output of U.S steel suppliers if the level of imports increases.

Can United States Steel Giants Meet the Projected Increase in Demand?

While promises have been made to improve the steel industry and to invest in American products and American businesses, are the U.S. leaders in structural steel equipped to cope with an increase in demand? Statistics from the first months of 2017 show that the steel industry is running at only 73%; can this figure be improved? Will steel plants have the capability to improve their numbers?

Glaser & Associates argue that we can definitively help US steel production stay aloft and meet demands. We’ve supplied contractors and government projects with steel stock, custom anchors and bolting, and structural steel connections from Lindapter. Glaser has been producing steel products for the better half of a century “striving for absolute and specific solutions” for their clients.

2017 is certainly set to be a turning point for the U.S economy and its manufacturing industries. How will current trade agreements and legislation change and affect productivity? Are manufacturers equipped to cope with a surge in demand? Will imports eventually become commonplace? Some uncertainty still lies ahead for the steel industry, but changes do appear to be emerging for its betterment.

For more information on NAFTA, Buy America, and Buy American Acts, please use the resources below:

 

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