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Texas ProFab Corp.
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Ohio Laser LLC
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Al Zelt, ASKO Inc
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Steel & Pipe Supply Co. Inc.,
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Kawasaki Motors Mfg. Corp. USA
Amada America Inc.
MC Machinery Systems/
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Industrias Selbor SA de CV
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Airgas USA LLC
Form Tech Concrete Forms
President & CEO
Fabricators & Manufacturers
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FROM THE EDITOR-IN-CHIEF
Read more from Dan Davis at www.thefabricator.com/author/dan-davis
Instead of talking about political activism—be- cause I think I would lose you a;er you read the first paragraph—let’s talk about steel prices,
which should grab the attention of any metal fabricator. Would you be able to absorb higher material
costs into your business without it significantly affecting your overall business?
I’m betting not. That’s why you should be concerned about the potential for steel prices to spike
to levels not seen in many years.
On April 20 the Trump administration enacted
a Section 232 (of the Trade Expansion Act of 1962)
investigation to determine if imports of steel products represent a threat to national security. The U.S.
Department of Commerce leads the investigation,
and the secretary is supposed to deliver findings,
and potential remedies if needed, to the president
within 270 days of when President Trump signed
the memorandum that announced the start of the
The steel industry met the news with enthusiasm.
Traditional steelmakers, such as U.S. Steel, led the
parade as many of these companies have enjoyed
few profitable years in recent memory. Because
their mills convert raw ingredients such as iron ore,
limestone, and coke into steel products, they have
high fixed costs, and they have really been hurt by
steel imports. According to the American Iron and
Steel Institute (AISI), imports commanded 25 per-
cent of U.S. market share through April. Implemen-
tation of multiple tari;s and duties over the past
couple of years has helped to drive that down from
29 percent in 2016. The mini-mill segment, led by
Nucor Corp., relies on electric arc furnaces to melt
steel scrap into a molten state to create steel prod-
ucts. Because it has a much lower cost structure
when compared to the more traditional integrated
mills, it has performed more profitably over the
past several years. In fact, Nucor reported its largest
quarterly profit since 2008 in April. That still doesn’t
stop it from claiming that it too is being harmed by
Many metal fabricators probably didn’t notice the
news, although they may be aware of rising prices.
In the first-quarter “Forming & Fabricating Job Shop
Consumption Report” from the Fabricators & Manufacturers Association (FMA), 59. 4 percent of those
surveyed reported that raw material prices were going up, and 39. 8 percent said the prices were staying
right where they have been.
They should be taking note, however. According to FMA’s 2016 “Financial Ratios & Operational
Benchmarking Survey,” 61 percent of metal fabricating companies surveyed reported that direct
material costs represent anywhere from 30 percent
to 64 percent of overall sales.
U.S. OEMs and metal fabricators already pay
some of the highest prices for steel. A leading steel
market newsletter suggests that U.S. manufacturers
pay about 81 percent more for hot-rolled steel and
92 percent more for cold-rolled steel than China-based companies. On average, U.S. companies pay
about 40 percent more than their counterparts elsewhere in the world.
The Section 232 investigation may result in further restrictions on foreign steel supply, which will
cause further steel price increases. Fabricators not
familiar with current steel prices should keep in
mind that in March the index price for cold-rolled
steel was the highest it had been in about six years.
The potential for prices to increase to levels not seen
in a decade is real. Given that some fabricators are
locked into price-fixed contracts with large OEMs or
simply have no wiggle room when it comes to pricing with their customers, any large increase in raw
material prices could prove to be devastating to an
economic segment that, frankly, has a much greater
impact on the health of the overall U.S. economy
than other segments have. AISI estimates that the
U.S. steel industry employs 140,000 people; the
Manufacturing Extension Partnership reports that
58,000 U.S. manufacturers of fabricated metal products, which is only one of the metal manufacturing
segments identified by the North American Industry
Classification System, employs 1. 4 million, about 13
percent of all direct manufacturing jobs.
With the steel industry currently operating successfully—even U.S. Steel is expected to post a
profit in 2017—and the U.S. able to impose penalties when it believes dumping is occurring, as it did
in 2016, is this type of review really necessary? Is it
worth the risk of shaking up a very important segment of the U.S. economy when everything is lining
up for a real economic rebound for which people
have been waiting for years?
This is where the activism comes into play. Contact Brad Botwin, director of industrial studies, U.S.
Department of Commerce, 1401 Constitution Ave.
NW, Room 1093, Washington, DC 20230, and let him
know that trade penalties on imported steel might
have devastating e;ects on metal fabricators. (He
also can be reached at email@example.com
Can your fabrication operation
absorb a huge spike in steel prices?
If not, you should probably be contacting the Commerce Department