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Small manufacturers in Western Pa. not seeing boon from steel tariffs | TribLIVE.com
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Small manufacturers in Western Pa. not seeing boon from steel tariffs

Joe Napsha

Some of the region’s steelmakers and small manufacturers found the Trump administration’s 25% tariff slapped on imports almost two years ago was not the business boost they were promised.

Customers accustomed to paying a certain price for their products were not keen on seeing costs jump because of the tariffs, company officials said.

“I thought it was going to be a much better overall process for us, but it turned out to be a slightly negative impact,” said James Philipkosky, chief executive of MLP Steel in Scottdale.

With tariffs raising the price of foreign steel — which had served as a regulator in the marketplace — domestic prices jumped 20% in the second and third quarters of 2018, said Philipkosky, whose company operates Fayette Custom Wire Products in Scottdale and Laurel Custom Grating in nearby Everson.

Because of stiff competition, MLP could not pass along 100% of the price increases to customers when “steel prices in the United States actually went up quite a bit,” Philipkosky said.

The combined plants, with between 45 and 50 employees, are steel-intensive in their products. Fayette Custom Wire buys large spools of U.S.-made wire and makes it into products used in roads, bridges, buildings and vehicles. Laurel Custom Grating turns carbon steel, stainless steel and special alloys into heavy-duty drainage grates used on roads and bridges.

“We’re competing with multi-national companies that have a broader base,” said Philipkosky, who purchased the former Marwas Steel Co. in Scottdale in January 2008.

Small manufacturers like MLP Steel are not large enough to hedge their bets on tariffs or amass steel inventory three to six months in advance before prices increases that follow tariffs, Philipkosky said. But, the company had the space to store some of the lower-priced inventory in its warehouse, he noted.

“If you’re not big enough, you can’t hedge it. If there is a downturn, you are stuck with it,” said Philipkosky, who grew up in Long Branch, Washington County. He went on to earn business and engineering degrees from Harvard and Columbia universities before becoming a successful venture capitalist.

On the bright side, “things are stable for growth,” Philipkosky said.

Exemption sought

The tariffs made it tougher for Ed Sikora’s JATCO Machine & Tool Co. Inc. in Bellevue, which manufactures precision thermoplastic injection moulds for Fortune 500 companies. The company experienced the same hit on production costs.

His company relies on the imported finished steel from China for the injection moulding parts because it is cheaper than making it here, Sikora said.

“We can’t afford to absorb that cost,” so the company had to pass along the increase to its customers, Sikora said. It made sure in its billing to attribute the price hike to the tariffs, said Sikora, executive director of the Pittsburgh Chapter of the National Tooling & Machine Association.

Neither have the tariffs made life easier for a $4 billion company like Pittsburgh-based Allegheny Technologies Inc., a stainless steel firm, which is seeking an exemption from the tariffs.

Robert Weatherbee, Allegheny Technologies CEO, said last week ATI needs the exemptions for nickel-bearing stainless steel slabs from Indonesia, which it uses for its stainless steel plant in Midland, Beaver County. Without those exemptions, the plant may be forced to close within months because of higher production costs, Weatherbee said.

The Trump administration last April rejected a similar exemption request.

Tariff supporters

From the perspective of the American Iron and Steel Institute, a trade group based in Washington, D.C., Trump’s use of the Section 232 trade remedy “has helped create a more favorable climate for steel, with imports declining and shipments and production rising since the tariffs’ implementation,” said Lisa Harrison, a vice president for AISI.

Imports make up a smaller part of the steel market, Harrison said, even though that has softened in the last few months. The U.S. imported 24.7 million metric tons of steel for the first 10 months of 2019, down 16% compared to the same period in 2018, according to the Census Bureau. Imports in 2017 reached 34.6 million metric tons, according to the U.S. International Trade Administration.

As an indication of the success of the tariffs, shipments of U.S. steel mill products were higher in 2018 than in 2017 and are up for 2019, compared to the same period in 2017, Harrison said. Several idled steel mills have been restarted, and American producers have announced plans to invest in new steelmaking capacity, she added.

While the current utilization rates of steel mills are improving, they are still far below the decade prior to the recession, Harrison said. Global steel overcapacity continues to be driven by unfair trade practices, government-owned and controlled steel industries, and other trade distortions, she noted.

President Trump drew praise from Ted Bush, national field coordinator for the non-profit Coalition for a Prosperous America, who praised the tariffs on steel.

“Mr. Trump is correcting our trade problems,” Bush said.

Joe Napsha is a TribLive reporter covering Irwin, North Huntingdon and the Norwin School District. He also writes about business issues. He grew up on Neville Island and has worked at the Trib since the early 1980s. He can be reached at jnapsha@triblive.com.

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Joe Napsha | Tribune-Review
Steel bars are piled up at Laurel Custom Grating LLC in Everson, waiting to be cut and shaped into grating for roads and bridges.
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