The U.S. Steel Industry Wants a Helping Hand from Uncle Sam
The U.S. steel industry wants more protection from foreign imports, continued access to cheap energy, and increasing infrastructure spending. That's a nice wish list that industry executives from ArcelorMittal and U.S. Steel recently brought to Capitol Hill. They can support their points, but will they get what they want?
Stop the imports
According to ArcelorMittal USA CEO Mike Rippey, "U.S. steelmaking facilities are running at only 77 percent capacity." In his company's last two quarterly conference calls, Nucor CEO John Ferriola has basically blamed imports. He has said that overcapacity is the, "...greatest threat..." to the steel industry and has made specific calls for policymakers to, "address the huge issue of global steel overcapacity." So far, that's taken the shape of trade cases.
On that front, there have been a few wins recently. For example, AK Steel CEO James Wainscott noted in the fourth quarter that, "...the International Trade Commission has made a preliminary finding in favor of the domestic [electrical steel] industry..." In his company's fourth quarter call, U.S. Steel CEO Mario Longhi pointed out that, "The U.S. Department of Commerce is expected to announce preliminary anti-dumping duties in February for the [oil country tubular goods (OCTG)] trade case." Although the dumping cry may sound like a broken record to some, it looks like Washington is listening to U.S. steel on this one.
But limiting imports is only part of the problem; the U.S. steel industry also wants to see more infrastructure construction. That's a double benefit since the industry will see increased steel demand and use the upgraded infrastructure to move product and receive supplies. The frightening talking point for this call is the D+ grade given to domestic infrastructure by the American Society of Civil Engineers.
Even if the Society's call for $3.6 trillion of spending by 2020 is answered, however, it doesn't mean U.S. steel will be a big winner. For example, the Metropolitan Transportation Authority of New York sourced steel from China for its Verrazano Bridge project. That ruffled some feathers, however, and it tapped the expertise of ArcelorMittal's U.S. mills when the Tappan Zee Bridge project came up.
If that's the start of a buy American trend, the U.S. steel industry will be on solid footing. Still, while the industry visiting D.C. can help ensure that such a push takes hold, it can't guarantee it. Keep an eye on big infrastructure projects to get a sense of where government leaders are heading on this one.
Keep costs down
Keeping energy costs low is another big issue for the domestic steel industry, but it's likely to have a harder time gaining traction here. That's particularly true now that Russia has taken over Crimea. While steel titans were asking for low energy prices at one hearing, another hearing saw impassioned calls to use increased natural gas exports as a tool against Russia.
Leaders from Nucor and U.S. Steel have both pushed Washington in the past for limits on natural gas exports. In fact, Jennifer Diggins, director of public affairs at Nucor has specifically stated that her company wouldn't have been able to invest in a recently built facility, "...if the price of natural gas had stayed where it was six or seven years ago."
Unfortunately, the oil and gas industry carries a pretty big stick in Washington, too. And the anti-Russia card is both strong and popular. It's probably safest to anticipate increasing fuel costs in the domestic steel industry.
You win some you lose some
The U.S. steel industry is important in many ways and after five tough years, it's due for some good news. It looks like that's starting to happen with regard to imports and even domestic infrastructure spending. Continued Washington lobbying can only help sustain both trends. That said, two out of three ain't bad, so don't be too upset if the industry's call for keeping energy costs low, and natural gas exports limited, goes unheeded.
Increased gas exports would help this U.S. industry...
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The article The U.S. Steel Industry Wants a Helping Hand from Uncle Sam originally appeared on Fool.com.Reuben Brewer has no position in any stocks mentioned. The Motley Fool recommends Nucor. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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