When Imported Steel Makes Sense, Despite Tariffs

Outokumpu's Tornio plant is the most integrated stainless steel plant in the world. ... a comparitive advantage in the access to essential raw material in the stainless steel ... providing an almost absolute advantage in specialized stainless steel; Trump's misguided tariff policy's can't change that, it just raises the product price to U.S. end users.

'Gee, who knew global supply chains and interconnected economic comparative advantage could be so complicated?' Tariffs are a tax on US companies and US consumers. The jobs lost likely outnumber the jobs 'created' - when everything costs more due to tariffs, jobs will be lost as well as gained. Trump is hoping this doesn't start to show until after the next election... but eventually the invisible hand will swat even Trump. Business "genius" though he may be, he can'd dodge all the laws, particularly the laws of economics.

Thanks, Mr. Ewing, and 'Buck' for insights. I would just add that i think Alcoa moved aluminum production to Iceland because (1) electric energy is the main cost input for aluminum smelting, and (2) Iceland's geothermal resource provides carbon-free electricity {and thus the aluminum would not be subject to a carbon tax}. I do think the Trump administration's interest in reviving some core industry is potentially useful, but disruption is not helpful. If the U.S. is not going to build things like a more efficient electric grid, or replace old nuclear plants, why bother?

So we make a deal that their specific steel that we can't really make does not have a tariff, simple solution.

I worked for British Steel in the early 1960s'. BS was nationalised in 1947 to keep the cost of a key input to manufacturing in Great Britain low. While I was there iron ore was imported from Murmansk USSR and rolled steel exported to the USSR. This was in the days when the USSR was considered to be the greatest threat on earth. The need to keep GB manufacturing was paramount. Iron ore was also imported from Canada and Brazil as well as nickel from Canada. Britain prospered until Margaret Thatcher deliberately destroyed coal mining and steel production in the 1980s' and sent the cost of steel and aluminum through the roof. The USA today is going through a Thatcher ideology phase where steel and aluminum imported from Canada and elsewhere has tariffs of 25% and 10% respectively. Security is given as the official reason. Under WTO rules the tariffs will be rolled back within 3 years at which time US manufacturing will have suffered irreversible damage. Manufacturing in Canada has now become more competitive than it was before the tariffs were imposed. Canadians are bemused and at a loss in trying to figure out how the USA came to this level of self destruction. The major question here is how long will this go on and will it get even more irrational before it turns around.

Wonderful article full of nitty-gritty factory, business and personal micro-economic detail. Great photography as well. It’s not easy telling a story about the macro-economics of the global supply chain — this article did it. Kudos all around!

Complicated subject. Hard to cover completely in a short article. Outokumpu has a large melting mill in Calvert, AL. In the US most stainless steel is produced using primarily recycled stainless steel scrap. Stainless steel mills prefer scrap as it reduces manufacturing costs. Some chrome, nickel and other alloy additions are necessary but the bulk of the melt in North America is from recycled scrap. The key to the T305 alloy is nickel content and the nickel as likely as not comes from Canada. Chrome is a smaller cost component of that alloy. The tariffs would have the effect of allowing domestic mills to raise their prices. The issue of alloy availability really becomes an economic concern; volume being the main driver. There is no reason why Outokumpu can’t make the referenced 305 in Alabama.

"Who knew it could be so hard?" Many. But not our "stable genius" popular vote losing president.

I have a BSc in Machine Tool Technology. The first course is Metallurgy. The differences between steels and stainless steels is a major point of emphasis. Unfortunately, the knowledge base of the US Trade Office on this subject is zero. Making a blanket tariff on 'steel and aluminum' is akin to a similar tariff on 'wood'. The costs for manufacturers needing these specialty metals will rise significantly and, of course, be passed through the supply chain. Another splendid example of appointing zealots to key regulatory offices and watching the chaos that results.

These tariffs, remember, were said to be for reasons of national security or to drive exporting countries like China (not like Finland) away from what was seen as bad trading behavior. What they are really doing is hurting friends and allies, and hurting Americans who pay more (every tariff is to citizens the same as a tax). Russia cannot be disappointed to see these results. In the light of this article, let us ask whether it protects the national interest of the United States to weaken the economy of Finland at this juncture.

The price of Finnish stainless steel has impacted the medical device manufacturers in the US. Forcing companies to move production to EU contract manufacturers. For example the price of a high utilized stainless steels used in medical instruments and implants has jumped up 30%, this is contributing to higher prices or bigger losses. Why the bigger losses?, most American companies do not sell instruments, Orthopaedic Joint replacement cases instruments are loaned and consigned to hospitals, making return on instrument difficult due to price erosion of implants. American jobs are at risk, unless a solution is found.