What Rising Steel Prices Mean For Biden’s Infrastructure Deal
Domestic production idles and Trump-era tariffs preclude cheap imports from entering the US.
The Biden Administration’s push for infrastructure could be stifled by skyrocketing steel prices, as domestic production idles and Trump-era tariffs preclude cheap imports from entering the US, according to a new analysis from S&P Global Market Intelligence.
While steel companies have ramped up and recovered from early pandemic-era production cuts, analysts told S&P Global that domestic supply is simply not keeping up with demand, pushing the price of steel on an upward trajectory since September 2020. Share prices of major steel companies are also trading at more than 200% higher than their prices a year ago, the firm’s analysts say.
The 25% tariffs on steel imports put into place in 2018 are partly to blame, says Ronald Cecil, principal Market Intelligence iron ore and steel analyst.
“The tariffs have had an impact to a degree. [The US is] not a massive importer, but you import steel, and it is obviously having an impact on the cost of bringing that material in,” Cecil told S&P Global. “Add to this that a lot of capacity’s been taken out of the market over the last four years [and] it’s less competitive to produce.”
Production cuts in China could also have played a role in raising prices in the US and elsewhere, though analysts also note that the European market has posted a smaller price jump. And this could spell trouble for Biden’s infrastructure deal.
“Assuming the billion-dollar infrastructure bill gets passed, simplistically what this means is at current steel prices, less airports get built and less bridges get built,” HSBC senior equity research analyst Jonathan Brandt told S&P Global. “The impact of the program is diminished by higher commodity prices.”
Despite that, steel execs remain bullish on the market, and the Biden Administration has kept the Trump tariffs in place. US steel output hit 83.6% of production capacity on July 10, versus 60.3% a year prior, according to data provided to S&P Global by the American Iron and Steel Institute.