Posted on 03/08/2002 6:02:50 AM PST by 11th Earl of Mar
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Business News Steel users brace themselves for higher prices Thursday, March 07, 2002By Barbara Wieland
Steelcase Inc. chose its name for a reason. The country's largest furniture manufacturer goes through more than 200,000 tons of steel a year, said Brian Van Dommelen, leader of corporate steel services for the Grand Rapids-based company. Steel is the single largest commodity the company buys. So it is no wonder that Steelcase has turned a wary eye toward the tariffs President George Bush recently slapped on imported steel. The tariffs, ranging from 8 percent to 30 percent, could have a major impact on Steelcase's business. But how much of an impact remains to be seen, Van Dommelen said. Other steel users in the area also wonder how the tariff decision will affect business. Some have already seen steel prices increase. Others worry that foreign steel producers will shy away from the American market, causing a steel shortage. Part of the steel users' uncertainty rests on the complexity of the tariff decision. Some steel products will be exempt from the tariffs while others will see large price increases. And it is too soon to know how steel manufacturers, both domestically and abroad, will respond to the tariffs. Steel users may be unsure about future steel prices, but steel producers are not. Steel users such as Haworth Inc. and GR Spring &Stamping already see higher prices. The tariff could increase steel prices 20 percent at Holland-based office-furniture maker Haworth, spokeswoman Beth Parenteau said. She said 20 percent of Haworth's yearly purchases are for steel, not including components bought from suppliers that include steel. Steel prices have gone up at GR Spring &Stamping, too, President Jim Zawacki said. "Even before Bush made the decision, our suppliers started ripping up the contracts," he said. "They said they can't honor them anymore, that prices would go up." Normally, GR Spring &Stamping signs one-year contracts that lock in steel prices. The company, which stamps out metal parts and makes springs, uses 20 million pounds of steel a year. "We felt we've been let down," he said. "We didn't expect anything over 10 percent. This will raise our costs substantially." That cost might be high enough to prompt some manufacturers to leave the country, said Andrew Samrick, executive vice president of Mill Steel Co. His Grand Rapids company buys steel in bulk and cuts it down to size for office furniture, automotive and appliance manufacturers. Higher costs of production have induced some businesses to leave West Michigan before. That happened when LifeSavers decided to leave Holland for cheaper sugar prices in Canada, he said. Now, both Canada and Mexico might have cheaper steel than the United States. "With higher steel pricing, we'd expect those places to become far more enticing," he said. Samrick hasn't heard any local companies talk about leaving, but the topic has come up in industry trade association talks. "What could be done to prevent that happening? I honestly don't know," he said. Another steel distributor, Anderson Metal Service in Grand Rapids, thinks the tariff decision could further hurt the ailing tool and die industry. Anderson Metal sells steel to local tool and die shops, which make the dies manufacturers use to stamp out metal parts. Even before the tariff decision, many manufacturers were lured by cheaper prices offered by overseas tool and die shops. Now that the steel used by American tool shops will be higher, more manufacturers could opt to send their business abroad. Dan Anderson, president of Anderson Metal, also thinks the tariffs could lead to steel shortages. "There could be fewer foreign steel makers willing to sell to the U.S.," he said. "There's been talk about the possibility of steel allocations, where (steel) mills dictate how much steel is available to any company." Those shortages could push steel prices up even further, he said. It's still too soon to know if any of those scenarios will become reality, Anderson said. But it's something he and other steel users will watch in the weeks to come. "We'll have to wait to see how far-reaching it will be," he said. Press Reporter Rob Kirkbride contributed to this report.
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Yes, that's part of the scenario.
So, the fact that there are dozens of countries that would love to sell us steel if Japan cut us off doesn't change your mind about the impact this would have on the country?
OPEC has 11 member nations and does not control the total supply of oil that we import.
It takes far less than being "cut" off to have severe economic impact on our nation.
Agreed. Now, what would that impact be?
Imagine how let down they would feel if we wouldn't do anything to save our steel producing capacity and 5 years down the road, Chinese tanks go rumbling through Michigan because our fair weather foreign friends suddenly decided to quit selling us steel.
Yeah and you know how hard it would be for us to start producing steel again.
It takes lines of supply and expertise to go into a manufacturing project. If it's so easy to just jump into an industry, why didn't the Taliban suddenly start producing a tank for every tallywacker when they knew we were on our way? A nation of restaurant owners and park administrators (that's what the liberals want America to be, a 3 million square mile park), etc. just aren't going to be able to jump back into the steel industry years after it was abandoned.
Yes. And customers. Our fair weather friends won't stop selling steel to us. Their governments waste too much money subsidising their steel industry to turn away customers with cash.
Devastating. Steel is used thoughout our economy, whether for manufacturing or construction.
Yeah and you know how hard it would be for us to start producing steel again.
Very difficult. Steel production requires a complex infrastructure of expertise and supply lines for raw materials, equipment, etc. etc. It is also a very capital intensive industry that would require enormous investment to resurrect if allowed to collapse.
The liberal "chattering classes" most certainly will talk their countries out of saving America if we can't save ourselves.
Willie Green: "Steel production requires a complex infrastructure of expertise and supply lines for raw materials, equipment, etc. etc. "
Woe is the day my posts begin to look exactly like yours. LOL
Devastating how? Be more specific.
This is exactly why the EU, Japan, et al are so po'd and rightfully so. They have been accused of harming the US Steel industry by dumping their products in the US, but steel exports from these nations has decreased, not increased.
Also, it appears that Bush will harm American poultry farmers with his decision to protect the Steel industry, since Russia, presumably, has imposed tariffs on American poultry; Russia accounts for about 50% of American poultry exports.
OK. So if they raise our prices it's bad?
You were so close Willie. If they raise our prices it's bad. We agree. If we raise our prices it's good?
You lost me again.
I guess that could happen. I'll bet you big money it won't.
If other nations are subsidizing their steel industry they are basically taking money from their taxpayers and giving it to our steel consumers.
I say bring it on, sell us your stuff cheap. I don't see why we should follow their stupid example.
There is an enormous world glut in steel. There will always be someone to sell to us.
I wouldn't feel comfortable if 100% of our steel industry went bye-bye but if the old inefficient producers went away there would still be plenty of work for the smaller, more efficient mills.
We still produce the high end, value added steel products here. The stuff getting the tariffs is, if I understand correctly, mostly low-end cheap stuff.
The endgame would be OSEC and we would have to deal with another group of schmucks who price fix. Reagan understood it and so does Bush. An ounce of prevention is worth a pound of cure and anybody who claims this is calamitous should be able to flash back to the 80's and show you and I the global depression emanating from targeted tariffs.
And whats more, tariffs are constitutional.
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