Re: Steel Subsidies in the US
I used to be a steel & metals analyst, and at least in the countries I analyzed, and I would like to explain the background in which the US administration has recently moved to impose tariffs on steel imports.
Import tariffs are paid by the companies that import the steel. So either they pay the tariff and import anyway, or they choose to buy from a domestic company. In either case, their costs go up, and eventually it is the customer (that's you) who is punished because they need to pay higher prices for the goods in which steel is a cost factor.
I am not as familiar with the other industries, but this is the situation in steel:
Most of the steel giants are integrated steel mills, which take iron ore, turn it into steel, and then roll them into various long (ex: used in automobiles) and flat steel products (ex: construction steel). This is the older technology and its plants are very expensive to build, and quite expensive to maintain.
There are also mini-mills, that take steel scrap as raw material, melt it down in electric arc furnaces, and cast it into generally long steel products. Mini-mills require substantially lower energy consumption (70kg in terms of carbon) and associated CO2 evolution than integrated mill route (440kg in terms of carbon) to produce one metric ton of steel. This substantial difference is attributed to the considerable energy required to reduce iron ore into iron in the latter route.
However, recently, there came a technology for mini-mills to produce flat steel, called thin slab casting. This is Very Bad News for the existing giant steel producers, because this technology has both very low cost of establishment, and much lower costs of production.
In case you need a link to see that I am not making this up:
kawasaki-steel-21st-cf.or.jp
This is the reason for which there exist steel tariffs and quotas in various countries - to protect their own high-cost steel producers. The consumer is condemned to pay the higher prices of their domestic steel producers, in order to keep them alive with their outdated technology. This is understandable, of course, because there are significant repercussions with steel giants (that employ, sometimes, entire towns) going bankrupt or laying off thousands of people.
In short, steel is a commodity product, where the better steel is cheaper steel that still observes the strength requirements. Tariffs and quotas in steel industry serve only to protect a country's own outdated technologies against lower-cost producers. It can hardly contribute to a healthy market, and it is invariably harmful in the long run for the strength of an industry. |
