Trump's Real Plan for Steel Tariffs
Robert Dayton
CEO | COO | President | GM | BOD| P&L | JV and Manufacturing | High Growth CE0
Understanding the global picture of commodities has always helped me to manage a metals business, maximizing profits. Ninety-eight percent of iron ore with 1 1/2% Si is used to produce steel. This is also the necessary commodity for gray iron.
o The major producers of iron ore are Australia, China, India and Brazil. The USA isn't in the top ten producers of Iron ore.
o Iron ore is a low-cost commodity that requires huge capital investment. It is not cost efficient to ship iron ore, a low-cost commodity with little value added.
o The top steel producers are those same countries that are also the top producers of iron ore: Australia, China, India, and Brazil.
o US producers of steel can never meet or come close to the price of steel produced in the same countries that control the production of iron ore.
o The twenty-five percent tariff is probably the cost disadvantage that US producers have today in spite of their best efforts to dramatically build cost efficient plants.
o The real National defense issue is protecting a supply of iron ore and steel made by our closest allies.
o Trump has already agreed to exclude steel tariffs for Australia and will do the same for Brazil.
o Trump has excluded Canada and Mexico and will use this as leverage to re-negotiate better NAFTA terms.
o Trump will put limits on South Korean imports of steel to the USA.
President Trump will use the stick to negotiate with China on $60 Billion of other commodities and products. Europe doesn't produce iron ore in any quality, so they will also get the stick from Trump to get relieve to ship Chevy's to Germany. He will collect on his chip given to Canada and Mexico for better NAFTA terms. The price of steel and aluminum products will rise but not at the exaggerated rates predicted.
Robert Dayton
https://www.dhirubhai.net/in/dayton44