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Utah County steel companies feel blast of federal tariffs

By Karissa Neely daily Herald - | Jun 20, 2018
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Steelworker Victor Cruz, right, helps direct moving pieces of steel Friday, June 15, 2018, at Clegg Steel in Orem. Isaac Hale, Daily Herald

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Steelworker Pablo Gallegos welds Friday, June 15, 2018, at Clegg Steel in Orem. Isaac Hale, Daily Herald

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A steelworker loads finished steel pieces onto a truck Friday, June 15, 2018, at Clegg Steel in Orem. Isaac Hale, Daily Herald

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Steelworker Victor Cruz cuts metal Friday, June 15, 2018, at Clegg Steel in Orem. Isaac Hale, Daily Herald

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Steelworker Jay Chamchay powder coats metal pieces Friday, June 15, 2018, at Clegg Steel in Orem. Isaac Hale, Daily Herald

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Metal pieces lie in a pile Friday, June 15, 2018, at Clegg Steel in Orem. Isaac Hale, Daily Herald

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Steelworker Lee Thibodeaux unloads steel from a truck Friday, June 15, 2018, at Clegg Steel in Orem. Isaac Hale, Daily Herald

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Steelworker Pablo Gallegos helps move a piece of steel Friday, June 15, 2018, at Clegg Steel in Orem. Isaac Hale, Daily Herald

When President Donald Trump’s steel and aluminum tariffs were announced in May, the news sent ripples throughout the domestic and international business community.

Trump signed two proclamations May 31 issuing the tariffs on imports of steel and aluminum from Argentina, Brazil, and Australia. Canada, Mexico and the European Union were quickly added to that list June 1. In a statement released May 31, White House officials said the tariffs “have already had major, positive effects on steel and aluminum workers and jobs and will continue to do so long into the future.”

Utah County steel distributors, fabricators and suppliers have not seen that positive effect yet.

“Even before the tariffs went into effect, when they were just being talked about, we were affected,” said Richard John with Rocky Mountain Stainless in Lehi. “Suppliers were already jacking up prices. And they weren’t guaranteeing them for more than a day.”

Rocky Mountain Stainless fabricates and installs steel process systems for food and beverage industries in Utah and beyond, and before the talk of tariffs, John said steel prices were usually stable for six months to a year. The current pricing uncertainty has been very disruptive to business. The Rocky Mountain team has had to communicate this uncertainty to its own customers, adding language to job bids about potential steel price increases.

“One project — we bid $400,000 for it last year. They came back and looked at it again recently, and now it’s $700,000 just because of the increase in material costs,” John said.

Rocky Mountain and its clients are now faced with absorbing the higher material prices, or rethinking their projects and designs.

Steve Clegg, owner of Clegg Steel in Orem, has seen the same problems. Clegg Steel provides structural steel fabricating and erecting in residential and commercial buildings, and most of its projects are bid out several months in advance. Clegg said they’ve had to build a cushion in their pricing to accommodate for steel’s fluctuating prices.

“There’s a lot of work out there,” Clegg said of his industry. “But it is stressful when steel prices go up on a job you bid three or four months ago.”

John and Clegg place the pricing problems on United States domestic steel suppliers.

“The domestic steel mills are making a killing right now,” Clegg said. “The tariffs technically have nothing to do with them, but they are still upping their prices. They are charging more just because their competitors are having to pay more. And they are just pocketing the difference. They are really taking advantage of it.”

Both John and Clegg are hopeful steel’s current volatility will calm down sooner rather than later. And even despite his business frustrations, John said he is in favor of the tariffs overall, because the new regulation more fairly evens the playing ground for those involved in the global steel economy.

“I think, hopefully it will balance out to be more fair to both sides,” John said. “We needed to readjust things.”

Clegg said he is fine with steel pricing increases, but businesses in the industry need consistency. The current unpredictability wreaks havoc on job scheduling and invoicing. He also is concerned that if the pricing does not settle quickly, it may lead to economic issues related to the high expense of building.

His concern has validity, because a recent World Trade Center Utah analysis shows the potential for retaliatory tariffs from the United States’ key trading partners. The study shows retaliatory tariffs could depress agricultural commodity markets in Utah and across the United States.

According to WTC Utah information, Utah exported $128 million in iron and steel across the world in 2017. Nearly 65 percent was exported to Canada, and another 10 percent to Mexico. Combined with the European Union, close to 80 percent of Utah’s iron and steel exports are accounted for by these three partners.

The analysis asserts these tariffs also threaten 16 percent of Utah’s $68 million in aluminum exports and 22 percent of Utah’s $55 million in electrical equipment exports. According to the study, “Utah’s agriculture, food and dairy products will also be subject to these tariffs, including nearly $2 million in pork products, $500,000 in cheese exports to Mexico and millions in other food products.”

“With the steel and aluminum tariffs now in effect, they are beginning to tarnish the relationships we have with some of our top trade allies,” said Derek Miller, president and CEO of WTC Utah, in a press release about the analysis. “In addition to the strain placed on Utah companies, consumers will also feel the consequences of the retaliation as they begin paying higher prices for goods.”

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