Mark Millett, president and chief executive officer of Fort Wayne-based Steel Dynamics, Inc., was caught off guard along with the rest of his industry by a new tariff announced late last month on imports from Mexico.

In an official statement May 30, President Donald Trump said he was invoking the International Emergency Economic Powers Act to address a southern border emergency with plans to impose a 5% tariff on all goods imported from Mexico, starting June 10.

The tariff would increase by 5% per month in July, August, September and October, and then remain at a 25% level “until Mexico substantially stops the illegal inflow of aliens coming through its territory,” he said.

Mexican immigration laws are strong enough to easily stop the flow of undocumented migrants, but Mexico’s passive cooperation with people who cross the border illegally is allowing a mass incursion that constitutes an emergency, Trump said.

A reporter at an American Iron and Steel Institute news media briefing asked industry leaders for a reaction to the tariff, and Millett was the first to answer, saying “it took at least myself by surprise.”

In addition to leading SDI, he is vice chairman and co-founder of the Steel Manufacturers Association.

“I think the USMCA (United States-Mexico-Canada Agreement) discussions were moving quite rapidly and toward a conclusion,” Millett said. “I would just hope that it doesn’t slow that down.”

The June 4 media availability during a joint AISI and SMA general meeting touched on the state of the steel industry as well as several key steel issues, such as imports and trade policy.

Other executives participating in it included John Ferriola, president, chairman and CEO of Nucor Corp., which has Vulcraft Indiana and Nucor Fastener Indiana operations in St. Joe, Harris Rebar operations in Auburn, and Nucor Building Systems Indiana operations in Waterloo.

In addition to SDI’s headquarters, northeast Indiana locations of Steel Dynamics include corporate offices for its subsidiaries New Millennium Corp., OmniSource Corp. and Iron Dynamics Inc. in Fort Wayne; a division of its Flat Roll Group in Butler and its Structural and Rail Division in Columbia City.

At Nucor, Ferriola’s reaction to the tariff announcement also was a surprise, he said during the briefing.

“I think it was obviously to deal with an issue that he (Trump) thinks is very important, and that’s immigration. I also share Mark’s position that we hope it does not impact the USMCA. We think that that’s a good thing for the steel industry, for manufacturing in general, and for the United States economy as a whole,” Ferriola said.

“We’re hopeful that working together with the U.S. government and the Mexican government, we can come to grips with this issue of immigration and get back to dealing with the trade issues that we believe are very important to solve.”

In response to a question about steel market weakness during recent months, Millett and Ferriola said uncertainty is causing some buyers to slow steel purchasing.

In addition to tariff-related uncertainty, Ferriola said some buyers could be waiting to see what is going to happen with several factors that affect their business, including “what’s going on with the political climate in Washington.”

When people in the steel industry look at its fundamentals, U.S. demand for the commodity hasn’t changed, he said.

“I think the secondary issue is there’s been anticipation of downward draft in raw materials, and any time that the consuming base feels scrap is trending down, they take the foot off the order book,” Millett said.

SDI and other companies have announced projects that will add to the nation’s steel production capacity, and industry leaders were asked if they had concerns about future excess capacity eventually driving down the commodity’s prices.

Steel Dynamics announced plans in November to invest up to $1.8 billion building an electric-arc-furnace flat roll steel mill somewhere in the southwestern United States.

With an annual production capacity of 3 million tons, the project’s value added finishing lines that will include a galvanizing line with an annual capacity of 450,000 tons and a paint line with annual coating capacity of 250,000 tons.

Flat roll products made there will include hot roll, cold roll, galvanized, Galvalume and painted steel, mostly for the appliance, automotive, construction and energy sectors.

SDI plans to begin construction on the mill next year and start operating it during the second half of 2021.

“I can’t speak for the other projects, but for ours, I think the investment premise or the industrial logic is phenomenal,” Millett said of it at the briefing.

“We’re going to be building that facility in what I would consider a vacuum of domestic capacity,” he said. “Today in the Texas, Louisiana, Oklahoma, Arkansas market there’s 7 to 8 million tons. Right next door you’ve got a 15 million-ton Mexican market growing to 20 million tons….

“At that facility, we’re going to be providing a very, very cost-competitive, value chain additive product for them.”

With the location of U.S. steelmakers in the domestic steel-consuming market and advantages such as readily available and inexpensive energy, an excellent workforce, and good access to capital and raw materials, Ferriola said they should be producing more of the commodity.

“I believe with the more modern facilities that are being built, our opportunities to compete more effectively against imported steel will increase, and if we are able to maintain a balanced, level playing field against international competition, we’ll do quite well,” he said.

Investment in the type of production capacity that could help revitalize the U.S. steel industry is exactly what the administration was hoping would result from the tariffs imposed last year to defend it, Ferriola said.

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