U.S. Steel will reopen an idle plant in Illinois in anticipation of increased domestic demand following President Trump's announced 25% steel and 10% aluminum tariffs. The steelmaker will be calling 500 employees back to work to the plant - which was set on idle status two years ago as a flood of cheap imported metals have pushed down domestic steel prices.
"We're really excited to be able to tell our employees in the community in Granite City, Illinois, that we will be calling back 500 employees," said CEO David Burritt in an interview with CNBC's "Squawk Box."
Two blast furnaces will be fired back up at the Granite City Works integrated steelmaking plant in Illinois - a process which could take up to four months, and will add approximately 1.4 million tons of steel annually to the U.S. market - generating up to $85 million in pretax income in 2018 for the company. The restarted furnace will require inventories of iron ore, metallurgical coking coal and other ingredients to operate. The site also has another idle blast furnace which could be restarted later.
The facility had been idle since December 2015 over what Burritt called unfair trade practices. "If you don't have customers here to sell to and you can't make money, you have to shut them down."
Steel producers have been hurt in recent years by increasing competition from foreign competitors, particularly China, that have ramped up production at lower prices.
Prices have been rising again in the U.S. in part because of the Trump administration’s discussions over whether to widen tariffs that have been applied piecemeal in recent years. Spot-market sheet-steel prices have risen more about 37% since October to about $810 a ton, according steel-industry price surveys. -WSJ
“Our Granite City Works facility and employees, as well as the surrounding community, have suffered too long from the unending waves of unfairly traded steel products that have flooded U.S. markets,” said Burritt.
President Trump announced the tariffs on steel and aluminum last Thursday - a move widely credited with the "last straw" in White House economic advisor and former #2 at Goldman Sachs, Gary Cohn.
Commerce Secretary Wilbur Ross appeared on CNBC Wednesday with Burritt, where he said the White House is not trying to "blow up the world" with tariffs - indicating that President Trump was open to exempting U.S. trading partners Mexico and Canada under a reworked NAFTA deal.
"This feels like the beginning of a renaissance for us," said Burritt, a former chief financial officer at heavy equipment maker Caterpillar. "It's really important that we get this right, and now it's finally happening."
"You've got to be able to make stuff in the United States. If you take away our ability to make things, you don't really have a society."
"Just think about the way the U.K. used to have a big manufacturing base. It went away. If you don't make stuff, you can't have a strong country. You can't protect yourself and you go by the way of Greece or maybe Puerto Rico," added Burritt.
Not everyone's happy
As the Wall St. Journal notes, the tariffs are going to affect several domestic manufacturers, including Caterpillar Inc. and Harley-Davidson Inc., which have both said the tariffs could significantly increase their raw material costs. Construction equipment firm Terex Corp said it would simply pass on higher steel costs to customers.
“The steel market has moved as though the tariffs are going into place,” said Tererx CEO John Garrison Tuesday. “We can’t be the shock absorber for that significant increase.”