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New tariffs expected to create up to 26,000 jobs, but are likely to raise prices on cars, motorcycles, appliances and other items.

The new tariffs imposed on steel imports from Canada, Mexico and the European Union will boost hiring by the nation’s steel producers, but analysts doubt that the duties will dramatically revive an industry that once dominated the world.

Steel executives Roger Newport of AK Steel in Middletown and Tim Timken at Timken Steel in Canton have told financial analysts President Donald Trump’s decision to levy the 25 percent tariffs on steel imports are wiping away years of what they argue were unfair trading practices from foreign producers.

They have aimed much of their anger toward China, which does not export much steel to the United States. But they complain China has flooded the world market with excess steel tonnage and driven down the price of steel to the point where domestic producers have difficulty making money.

Jobs may go up, as well as prices

But while the tariffs may create as many as 26,000 new jobs in the steel and aluminum industry, few independent analysts believe the duties will return the Ohio steel industry back to the “time of Ozzie and Harriet,” said Ned Hill, a professor of economics at Ohio State University.

The tariffs are expected to lead to predictable consequences, including higher consumer prices for cars, trucks, and washing machines which use steel, and job loss in industries which buy steel. Critics point to 2002 when President George W. Bush’s steel tariffs cost tens of thousands of jobs in other industries and hammered ports such as New Orleans which receive shipments of imported steel.

“The downstream costs are what’s going to mess up” Midwest states such as Ohio, said Laura Baughman, president of the Trade Partnership in Washington.

The Trump administration in May announced it would impose a 25 percent tariff on steel and 10 percent tariff on aluminum imports from Canada, Mexico and the European Union. Canada, Mexico and the EU plan to strike back steep tariffs on a variety of U.S. exports, including an EU tariff on motorcycles manufactured in the United States.

Chinese tariffs to start Friday

The administration then said on July 6 it would levy a 25 percent tariff on $34 billion worth of Chinese imports, prompting China to vow to match those tariffs on the same amount of U.S. exports.

“A tariff is nothing but a tax on consumers and it gets passed along,” Hill said.

Not only has Harley Davidson planned to shift production from the United States to evade the European Union’s retaliation against Trump’s tariffs, but Ohio soybean farmers will have a more difficult time selling their products to China.

On Sunday, Canada retaliated with $12.6 billion of tariffs on U.S. exports, including steel, aluminum, motorboats, yogurt and bourbon.

There is no doubt the U.S. steel industry has lost its once-astonishing dominance. U.S. annual production of steel peaked at 137 million metric tons in 1973 compared to 78 million metric tons in 2015.

Steel employment has plummeted

Employment in the steel industry has plummeted from 216,000 jobs in 1998 to 139,800 in 2016. Since 2000, the nation has lost 25 percent of the basic oxygen furnace facilities, including RG Steel plants in Steubenville and Warren, and the Republican Steel plant in Lorain, although the latter is scheduled to resume some production in September.

At a Senate hearing last month, Sen. Sherrod Brown, D-Ohio, said “we know the culprit behind these layoffs” at RG Steel and Republic Steel in Lorain “is global steel overcapacity which started as a singularly Chinese problem but has infected the global market as other countries have followed their lead with state supported steel companies.”

Brown said he opposes the steel tariffs imposed on Canada, Mexico and the EU, but last week he blocked a Senate Republican measure that would have scrapped the duties. Brown said he opposed the GOP bill because it would eliminate the Chinese tariffs and undercut the Trump administration’s efforts to negotiate a revised North American Free Trade Agreement.

During a conference call with financial analysts in April, Tim Timken, chairman of chief executive officer of Timken Steel said “the announced tariffs will begin to level the playing field in the interest of fair trade and preservation of our national security.”

But economists and financial analysts say the decline in jobs and steel plants is caused by a broad range of factors such as a strong dollar, failure of the integrated steel mills to compete with mini mills such as Nucor, dramatic productivity gains in the industry, a decline in domestic demand for steel, and the brutal recessions of 1982 and 2008.

“When the plants started closing here in the 1980s, you could explain about half of those closures by foreign competition and half by domestic competition,” said Frank Giarratani, professor emeritus of economics at the University of Pittsburgh.

Total domestic demand for U.S. steel, according to the Commerce Department, averaged 105 million metric tons annually from 2011 through 2016 with domestic producers providing at least 70 percent of that demand.

Creating a demand for U.S. steel

Critics argue that rather than tariffs, the federal government would have been wiser to stimulate demand for steel by spending hundreds of millions of dollars on new roads, bridges and mass transit.

“If there had been infrastructure bill, there would have been demand,” Hill said, adding that the postwar “world is not going to come back because the steel mills in the Ohio valley were there to make ships to save us from Hitler, build the interstate supply system and (supply) steel for skyscrapers. Well that demand is gone.”

In addition, the 1982 and 2008 recessions dealt a blow to the steel industry. The Commerce Department reported net income for U.S. steel companies rose steadily from 2004 through 2008 before the recession of 2008 transformed those profits into major annual losses.

The U.S. steel companies also became more competitive, meaning they produce more steel with fewer workers. In the 1980s, Baughman said, “the big integrated mills failed to recognize” that Nucor and other mini-mills were converting scrap metal into first-class steel and using few workers.

“When mini-mills came in, which were non-union, they were able to build a mill with 330 people while an integrated steel union might have had 2000,” said Charles Bradford, president of Bradford Research in New York.

Bradford said the mini-mills still produce more steel per worker than the integrated mills, but Baughman said larger companies have dramatically improved their productivity, adding “we are producing much more steel output per worker than we did in the 1950s,” with some studies showing it took 10 man hours in 1980 to produce a ton of steel compared to just one today.

The intense competition from abroad also has had an impact. China, Germany, Japan and South Korea emerged from the wreckage of World War II and the Korean War to create vibrant modern economies.

“In the 2000s, one factor stands out it is China,” Giarratani said. “In 2003, China was a really small player on the world market. It produced small amount of steel and the steel it produced was bad. The national government made a decision to modernize and expand its factories. Today, China alone accounts for more than 50 percent of world steel capacity and world streel production.”

“U.S. manufacturers have to compete with that world price and that price is very low and below a level where they can operate profitably,” Giarratani said.

The boss of German industrial giant Thyssenkrupp said lawmakers in Brussels need to protect Europe from an influx of cheap steel from Asian countries.

On June 1, 2018, the Trump administration imposed a 25 percent tariff on steel imports, and a 10 percent tariff on aluminum, from the European Union, Canada, and Mexico. This Friday, U.S. tariffs are to be imposed on $50 billion of Chinese goods.

Heinrich Hiesinger, the CEO of Thyssenkrupp, told CNBC from Brussels Monday that restricting global trade was “the wrong way to go.” He said while a reduction of steel sold to the U.S. was unfortunate, his bigger concern was where any surplus of steel from Asia would now end up.

“We are much more concerned about the likelihood that a lot of the volume (of steel) which cannot come in to the U.S. market might be re-directed to Europe and further increase the already really high imports here,” said Hiesinger.

“This is the area we need to watch carefully. If it does happen then the European Union will need to find answers to protect the European steel industry,” he added.

Hiesinger said China and a number of other Asian countries produced and exported steel which could erode profit margins among European firms.

In a bid to remain competitive, Thyssenkrupp and India’s Tata Steel signed a deal Saturday to become Europe’s second-largest steel firm. The new formed alliance, called Thyssenkrupp-Tata Steel, will employ around 50,000 workers. Combined annual sales, based on existing business, will add up to about 17 billion euros ($19.9 billion).

Hiesinger claimed savings could amount to as much as 500,000 euros each year as production sites can be used more efficiently and research and design (R&D) costs are to be split.

The deal, which involved no cash, was struck after a majority, but not unanimous, vote by Thyssenkrupp’s supervisory board. It will see the loss of an estimated 4,000 jobs.

Following the announcement, the share price of Thyssenkrupp fell around 1.4 percent when markets opened for trade Monday. On the Bombay Stock Exchange in India, shares of Tata Steel fell by about 1 percent.

The Swedish activist investor Cevian Capital is the second largest shareholder in Thyssenkrupp and has been critical of the company’s decision to partner with Tata, arguing instead that the German firm should be broken up.

Meanwhile, the U.S. hedge fund Elliott Advisors has also lambasted the deal, suggesting that Thyssenkrupp should have negotiated a larger slice of equity in the joint venture. Both firms are to hold a 50 percent equity stake.

Elliott reportedly bought a stake in Thyssenkrupp in May, but has not crossed the 3 percent threshold that would compel it to reveal its investment.

Share price of MOIL advanced 2.5 percent intraday Monday as company revised prices of different grades of manganese ore and other products, effective July 1.

The prices of ferro grade, SMGR (Mn30% & Mn25%), chemical grade and fines have been increased by about 5 percent on the existing prices. However, a discount at 5 percent will be offered on the prices effective from July 01, on specific grade of material BGF534 for dispatches during July’2018.

The basic price of electrolytic manganese dioxide (EMD), has been increased by Rs 200 PMT.

Ferro manganese/ferro manganese slag and some identified grades of manganese ore will continue to be sold on e-auction basis as well as through metal mandi (M3) of MSTC.

At 10:20 hrs MOIL was quoting at Rs 175.80, up Rs 2.15, or 1.24 percent on the BSE.

Major Thyssenkrupp shareholder Cevian called for further restructuring of the German conglomerate on Sunday, a day after it sealed a steel joint venture with India’s Tata Steel .

Activist investor Cevian is the second largest shareholder in Thyssenkrupp and, like fellow shareholder Elliott, has criticised Thyssenkrupp CEO Heinrich Hiesinger, saying there is significant room for improvement at the steel-to-submarines conglomerate.

“The creation of the steel joint venture and the deconsolidation of the steel business from Thyssenkrupp is a step towards reducing the overly complex conglomerate structure,” Lars Foerberg, founding partner of Cevian Capital, told Reuters in emailed comments.

“There is now an urgent need and opportunity to address the significant and persistent underperformance of the industrial businesses,” he said.

The joint venture with Tata Steel – to be named Thyssenkrupp Tata Steel – will have around 48,000 workers and about 17 billion euros (15.04 billion pounds) in sales.

Based in the Netherlands, it will be the continent’s second-largest steelmaker after ArcelorMittal . It forms the core of Hiesinger’s plan to turn the steel-to-submarines conglomerate into a technology company.

Foerberg said the best operating structure and ownership for each of the group’s businesses now needed to be assessed and that they would only survive and prosper if they were nimble and efficient.

“With the right strategic decisions and world-class execution, Thyssenkrupp could be valued at the equivalent of 50 euros per share, rather than today’s 21 euros,” he said.

German daily Handelsblatt separately reported, citing supervisory board sources, that Cevian had voted against the joint venture with Tata Steel.

Cevian declined to comment on the Handelsblatt report.

President Donald Trump wants to rebuild the nation’s transportation infrastructure. He also wants to strengthen the U.S. steel industry through tariffs on imports.

But that second goal could make it more costly to accomplish the first.

Since Trump announced the tariffs in March, prices have been rising for the American steel used to build bridges, reinforce concrete highways and lay the rails for mass transit systems. Though many of this summer’s big construction projects had locked in pre-tariff prices, concerns are mounting among contractors and some transportation officials that the tariffs could raise costs and delay work that is still in the planning stages.

“The president seems to be at loggerheads with two conflicting priorities of his administration,” said Brian Turmail, vice president of public affairs and strategic initiatives at the Associated General Contractors of America. “He’s making it very difficult for construction firms and people who build infrastructure to be successful, at least in the short term.”

In Kansas City, for example, voters recently approved higher sales and property taxes to fund a streetcar extension that had been estimated to cost at least $250 million. Though the project had been in the works for a year, officials are now recalculating.

“We are anticipating our prices to increase because of the tariffs,” said Donna Mandelbaum, communications director for the Kansas City Streetcar Authority.

Trump in February announced a $1.5 trillion infrastructure plan that would use $200 billion in federal funds to leverage state, local and private-sector investment. The proposal had yet to gain traction in Congress when the president announced tariffs of 25 percent on steel and 10 percent on aluminum imported from most countries. After a temporary exemption, the metal tariffs hit the U.S. allies of Canada, Mexico and the European Union on May 31.

Most federally funded transportation projects in the U.S. already are required by law to use U.S. steel. Tariffs are like taxes charged only on imported products.

But because they make foreign steel more expensive, tariffs also allow U.S. steel producers to raise prices without being undercut by international competitors.

The price of U.S. hot-rolled coil steel, a bellwether product for the industry, is up about 40 percent since the start of this year due to a combination of Trump’s tariffs and strong economic demand, said Joe Innace, the metals content director in the Americas at S&P Global Platts.

Prices also have been rising for specific transportation-related products, such as fabricated metal for bridges.

That’s created a predicament for the owners of a 127-year-old railroad bridge over the Mississippi River at St. Louis that is in danger of being shut down if not replaced soon. Bids for the $219 million Merchants Bridge project were made in February, shortly before Trump announced the tariffs. But in June, the administration denied a grant that would have financed one-third of the project.

Bridge officials now are scrambling to fill the funding gap before a July 7 deadline to decide whether to go forward with the winning bid. Adding to their urgency is the price for the needed 12,500 tons of steel.

“The bidding environment is not going to get better,” said Mike McCarthy, president of the Terminal Railroad Association of St. Louis, which owns the bridge. “In light of steel prices, I think they’re going to be creeping up.”

Some other states also are warily watching steel prices.

California already faces uncertainty because of an attempt to repeal a gas tax hike that’s projected to raise $52 billion for roads and bridges over the next decade. The state Department of Transportation is monitoring whether the steel tariffs will raise material costs “to determine if adjustments may need to be made in future contracts,” agency spokesman Mark Dinger said.

In Pennsylvania, concerns that tariffs could drive up the steel market have officials watching for any effects on their four-year construction plan, said Rich Kirkpatrick, a spokesman for the Pennsylvania Transportation Department.

Rhode Island transportation officials said they are allowing for retroactive cost adjustments in contracts to account for significant changes in steel prices. They have asked the Federal Highway Administration for permission to use federal money to cover those higher costs.

Steel-related products account for about 10 cents of every $1 spent on highways and bridges, though that ratio can be significantly higher for particular projects, said Alison Black, chief economist at the American Road & Transportation Builders Association.

Economic analysts say uncertainty about the duration and impact of the steel tariffs could force some projects to get scaled back or postponed. The ripple effect also could drive up costs for companies that manufacture asphalt pavers, graders and other heavy equipment used in road projects.

Ned Hill, a professor of economic development at Ohio State University, said the situation will “raise havoc.” If construction companies try to bid six months to a year ahead of time, “they aren’t going to know what price to bid on. … And public works departments aren’t going to know how much the project’s going to cost them.”

Germany’s Thyssenkrupp and India’s Tata Steel signed a final agreement on Saturday to establish a long-expected steel joint venture, the European steel industry’s biggest shake-up in more than a decade.

The final agreement comes after months of negotiations since an initial agreement was announced in September. Both companies hope it will help them respond to challenges in the volatile steel industry, including overcapacity.

The largest deal in Europe’s steel industry since the takeover of Arcelor by Mittal in 2006, the 50-50 joint venture – to be named Thyssenkrupp Tata Steel – will have about 48,000 workers and about 17 billion euros ($19.9 billion) in sales.

Based in the Netherlands, it will be the continent’s second-largest steelmaker after ArcelorMittal. It forms the core of Thyssenkrupp CEO Heinrich Hiesinger’s plan to turn his steel-to-submarines conglomerate into a technology company.

“The joint venture not only addresses the challenges of the European steel industry,” Hiesinger said. “It is the only solution to create significant additional value of around 5 billion euros for both Thyssenkrupp and Tata Steel due to joint synergies which cannot be realized in a stand-alone scenario.”

Tata Steel Chairman Natarajan Chandrasekaran, in a separate statement, said the joint venture will create “a strong pan- European steel company that is structurally robust and competitive”.

The deal comes as European steel makers face tariffs of 25 percent on their exports to the United States, their biggest market. That might force local market to absorb more volume as a result.

Since the tariffs were announced in late May, shares in European steelmakers ArcelorMittal, Thyssenkrupp, Salzgitter and Voestalpine have lost 8 to 17 percent.

Fresh terms

Hiesinger had faced pressure from activist shareholders Cevian and Elliott to extract more commitments from Tata Steel, whose European business has performed worse than Thyssen’s since the agreement was first announced, creating a valuation gap.

Thyssenkrupp said the deal included “proper compensation” for the gap, which it said was in the mid-triple-digit million- euro range: if the joint venture makes a widely expected initial public offering it would get a bigger share of the proceeds.

Thyssenkrupp said it also secured the right to decide when a listing might take place, adding the joint venture was aiming for a dividend payout in the low-to-mid-triple-digit million- euro range.

The German group also said it now expects annual synergies of 400 million to 500 million euros from the transaction. It said additional synergies were possible through managing capital expenditure and optimising working capital.

Tata Steel will remain liable for environmental risks in Britain, where its Port Talbot factory, the least profitable of the joint venture, is based, said Markus Grolms, vice chairman of Thyssenkrupp’s supervisory board.

He also said that Tata Steel’s Dutch unit would be part of the joint venture’s cash-pooling mechanism. That had been a key demand for German workers concerned that Tata would give its own workers better conditions in the new company.

“Yes, we do want to protect people. But we also want a company with better chances and less risks,” Grolms said.

Thyssenkrupp’s management will present a refined strategy to its supervisory board in the second week of July. Sources said that may include a sale of its Materials Services unit and further cost cuts.