Pittsburgh — Swelling demand for steel, rather than tariffs, has primarily bolstered surging prices in 2021, as manufacturers adjust to the strong economic recovery following the shutdowns in 2020 caused by the coronavirus pandemic, Cleveland-Cliffs CEO Lourenco Goncalves said May 10.
"It's easy to single out something as the culprit and say, 'prices are high because of the tariffs,' but that's not true," Goncalves said during a call with media. "It's all supply and demand. We are having, post-COVID, an influx of demand that is unprecedented because we had a time that was also unprecedented during the first months of COVID."
Goncalves said the circumstances that forced many sectors of global industry to temporarily shutter in 2020 created disruptions with little visibility for future market conditions.
"We are in a situation right now that everybody wants steel, and everybody wants steel now," Goncalves said. "That's because they did not prepare during COVID-time when prices were very low so, again, that's demand."
The rising prices and robust market now allow the US industry to continue expanding cost-competitive capacity that can meet domestic demand and reduce the need for imports, he added.
Moreover, Goncalves said higher steel prices in 2021 cannot be easily compared with lower prices in previous years that were "artificially depleted" and "not the norm" due to harmful circumvention, dumping and subsidization committed by foreign trade partners.
"It's about time for us to stop talking about prices and be more focused on the weaknesses that were introduced in the system by allowing manufacturing to be transferred to other countries that don't do anything better than us," he said. "They just circumvent what we have and try to take advantage of our market."
The daily Platts US HRC index was assessed at $1,501.50/st May 7 on an ex-works Indiana basis. The price has risen considerably since the $1,009/st assessment at the beginning of the year.
Tariffs needed until unfair trade is corrected
Goncalves said the US steel tariffs are not a "must have" from a business standpoint, but they are necessary to keep in place to deter unfair trade practices by certain foreign entities.
"The problem is that the bad players never learned and apparently continue not to learn [from the tariffs], and they will continue to make the same mistakes that caused the tariffs to be put in place in the first place," he said. "It's not a matter of having or not having the tariffs. It's a matter of having a type of market that rewards good performers and punishes bad performers, so if we need tariffs to punish the bad players, we need to continue to have the tariffs."
In a fair market, Goncalves said no foreign producers are able to "come here [to the US] and undercut our prices" unless they resort to trade practices that would trigger tariffs.
Infrastructure bill will bring immediate demand boost
Any meaningful infrastructure bill that is passed by Congress and the Biden administration will have swift and beneficial implications for the US steel industry, Goncalves said.
"Steel demand should reflect any improvement in legislation towards supporting infrastructure," he said. "It will be an immediate impact because as soon as we see the indications and the commitments for infrastructure, we will start investing and preparing for the demand."
Speaking with Goncalves during the call, US Representative Frank Mrvan, Democrat-Indiana, said the steel industry is prepared to make the capital investments in domestic mills that are necessary to support the nation's infrastructure needs, and this will further benefit the American manufacturing sector and economy.
"Ultimately, with the infrastructure bill, if we put forth and when passed, we can reinvest into our nation," Mrvan said. "Then the steel industry will create the supply to fulfill the demand for the next generation of jobs, and you'll have roads, bridges, waterways, ports and pipes that will be made out of American steel."
Source: S&P Global Platts