Port Houston Concerned about Proposed Steel Tariffs

Mar 9, 2018

Roger Guenther, Executive Director of Port Houston, a major importer of steel in North America, said he was worried that the proposed 25 pct tariff on steel cargo could decrease cargo volumes creating a detrimental impact on local jobs and the economy.

“Our history shows that steel cargo immediately declined following a tariff increase,” he said in a statement to World Maritime News. “We urge that the matter continue to be reviewed.”

The anticipated decline will have come on the back of record-breaking performance in 2017.

Namely, Port Houston facilities handled 38.3 million tons of cargo in 2017, surpassing the previous record of 37.8 million tons set in 2014, mainly driven by steel imports and containers.

The United States President Donald Trump is expected to formalize the tariff measures on Thursday, March 8.

To remind, the U.S. President announced a plan to boost domestic manufacturing by imposing tariffs of 25 pct on imported steel and 10 pct on imported aluminum a week ago.

Hence, U.S. importers of steel, like car manufacturers, will be forced to switch to domestic sources of steel paying more for it but not as much as if it were imported steel with high tariffs. The biggest exporters to the U.S. are Turkey, South Korea, Canada and Mexico. Some traffic from Canada and Mexico moves overland into the U.S. but a sizeable proportion is seaborne.

Commenting on the potential impact of the measures on U.S. ports and the dry bulk shipping industry in general, Drewry’s Head of Research Products, Martin Dixon, said that in the first instance seaborne imports of steel into the U.S. will likely fall and with that import volumes through U.S. ports.

“At the moment it is too early to say how trade flows might change as a result of these actions, as much will depend on whether there is demand elsewhere to pick up the reduced import demand to the U.S. But there is a possibility it could actually create opportunities for the dry cargo market. For example, if Canada is not exporting steel to the U.S. it will have to look further afield for its markets, which implies an increase in tonne mile demand, which is always a positive driver,” Dixon said.

Peter Sand, BIMCO’s Chief Shipping Analyst, said that any trade barrier is bad for shipping as a principle.

“Trade barriers set up by the U.S. may hurt a bit more as US-bound steel is likely to sail long distances. This means, steel not going to the U.S. may go somewhere else, but traveling a shorter distance,” Sand explained.

The likely retaliation to the tariffs from countries such as Canada and the EU will have a negative impact on shipping, Sand added, with dry bulk instantly affected. Other segments may also be affected by the retaliation.