By: Our Correspondent

US President Donald Trump’s aspirations for the resurgence of the American steel industry, long in decline, appear about to become entangled with global economics, which predict low growth prospects for both the economy and steel.  There is simply too much steel in the world, the OECD says, with more coming on line.

In-depth discussions on regional and global steel conditions by the Steel Committee of the 36-member Organization for Economic Cooperation and Development in late March have led to expectations of low growth prospects for both the global economy and the steel sector, with decelerating demand growth and severe excess capacity across the whole steel sector.

The world is expected to produce 425.5 million tonnes more than it needs when figures are totaled for 2018.

US producers have been able to raise their prices, in turn causing steeply rising prices for steel customers both for domestic and imported steel, although prices have since slumped back over the past few months.

President Trump is using tariff policy to expand production in the United States, however, at a time when the OECD is predicting steel-making capacity to increase by nearly 52 million tonnes by 2020. At the same time, the OECD is attempting to reduce excess production, which reached 561 million tonnes in 2017. Nonetheless, the world keeps adding capacity, with 39 million additional tonnes in the planning phase before 2020.  

The Steel Committee also called attention to “recent trade measures affecting steel and steelmaking raw materials” – an indirect criticism of the administration in Washington, DC – “with several delegations expressing concern about the impact of certain trade measures on steel trade flows, as well as the effect of these measures in prompting trade measures in other jurisdictions.”

The committee called for further capacity reductions “in relevant jurisdictions,” another swipe at President Trump, who has called for US steelmakers to reopen shuttered plants and put more steelworkers back on the job.

OECD officials called for the “swift removal of subsidies and other support measures that are distorting steel markets, as the only long-term solution to the structural imbalances in steel markets.”

Some US steel jobs admittedly are being created. According to wire stories, Nucor Corp. will build a US$1.35 billion steel-plate mill in the United States that would create approximately 400 new jobs. US Steel announced in mid-2018 that it plans to invest $275 million to $325 million in capital projects, to construct a new steel-coating line to help PRO-TEC, a subsidiary, make cars in Leipsic, Ohio, and to restart two blast furnaces that will create 800 new jobs at an integrated steel-making plant that was idled in 2015.

However, as a Reuters report notes, “based on a range of global trade data and recent US employment and wage trends, the Trump administration’s tariffs on steel and aluminum could cost up to 16 American jobs for every one created.”

Steel and aluminum tariffs have already cost Ford Motor Co and General Motors as much as US$1 billion in profits, the two companies said last September, with Honda Motor Co telling Bloomberg that higher steel prices have brought “hundreds of millions of dollars” in new costs.

“From Ford’s perspective the metals tariffs took about $1 billion in profit from us,” CEO James Hackett told a Bloomberg conference in New York. “The irony of which is we source most of that in the US today anyway. If it goes on any longer, it will do more damage.”

On March 6, the OECD revised its global GDP growth forecast downward, to 3.3 percent for 2019 and 3.4 percent for 2020 with downside risk including “a further increase in trade frictions, high economic policy uncertainty, and a further erosion of business and consumer confidence.”

Steel trade continues to decline amidst increasing trade actions in the global steel market, the OECD said. “Exports from most major steel-producing economies decreased significantly during January-October 2018, compared to the same period in 2017. The year 2018 was characterized by a significant increase in the number of trade actions related to the steel sector compared to 2017.”