Steelmakers like Tampa's Gerdau are hopeful of a renaissance under a Donald Trump presidency

Steelmakers like Gerdau in Tampa hope the Trump administration will give their industry new hope.
Published November 23 2016
Updated November 25 2016

TAMPA

Steelmakers nationwide, over the din from their mills and processing plants, heard the promises from Donald Trump on the campaign trail.

He promised to rip up trade deals and fight against the flood of cheaper foreign imports that have tortured the industry for years.

He pledged to push a major infrastructure spending bill through Congress, creating thousands of jobs through heightened demand for steel to build roads and bridges, airports and tunnels.

In Tampa, at the North American headquarters of one of the largest steelmaking operations in the country, Peter Campo was listening, too. And now that candidate Trump has become President-elect Trump, Campo is hopeful that a renaissance of his long-suffering industry might be at hand.

Cheaper steel imports and a global downturn in demand have both been taking a toll as Brazilian steelmaker Gerdau S.A. recently reported a 50 percent drop in third-quarter profits. This month, Gerdau (pronounced Grr-DOW) is shutting down production at its Calvert City steel mill in western Kentucky, idling up to 130 workers.

It's the latest in a string of mills shuttered since 2009, even as the company modernizes plants elsewhere.

But Campo, who heads Gerdau's North American Long Steel operation out of Tampa, has a double-dose of optimism of a "substantial" upside from Trump's election:

• Gerdau's North American unit furnishes nearly 25 percent of the steel that goes into America's roads and bridges, so it's well-positioned to benefit from a multibillion dollar infrastructure spending package if the Republican-controlled Congress backs the incoming Republican president.

• A significant rise in trade protections means U.S. steelmakers could stand out as a "unique beneficiary" of a Trump presidency, Jefferies analyst Seth Rosenfeld said in a post-election note.

Anti-dumping rules and countervailing duties have kept China from directly flooding the U.S. steel market with cheap imports. But there have been ways around it — such as using third-party markets that don't face the same barriers to import here. Like the Turks.

Turkish imports now account for 20 percent of the U.S. market for rebar, reinforcement steel bar used in construction to strengthen and hold concrete in place. That's roughly on par with Gerdau's market share.

Gerdau, which operates one of its rebar fabrication plants in Plant City, battles higher labor costs and more environmental restrictions than the importers. But a trade crackdown under Trump, it believes, could help.

"Absent any meaningful effort to invest in infrastructure and level the playing field in terms of trade, I would see employment in the steel industry continuing to go down," Campo said.

"With those things, I think it could go up."

• • •

In Brazil, Gerdau is a household name. Not so in North America, although its 17 mills make it one of the largest steel producers on the continent, and the product of its work is ubiquitous.

In New York, its steel is being used in the $3.1 billion Tappan Zee Bridge over the Hudson River, a major artery for northern access to the area. On the other coast, it's involved in building Apple's massive new campus at its Cupertino, Calif., headquarters, nicknamed "the spaceship."

Among its Florida projects: Tampa International Airport's expansion; the Miami Marlins ballpark; the Interstate 4 connector project; a multitude of condos and the Department of Transportation's largest-ever highway project: what will ultimately be a 20-mile stretch of I-4 through Orlando.

What about the largest local project on the horizon, the $2 billion redevelopment near downtown Tampa that is being spearheaded by Tampa Bay Lightning owner Jeff Vinik and Bill Gates' private capital fund Cascade Investment? It's still early, but "We're talking," Campo says.

Gerdau executives are also familiar with Tampa Port Authority officials — though Campo acknowledged he wasn't fond of a previous port marketing pitch "very proud of the fact that they were increasing steel imports through the port."

The message they'd prefer that the port convey: Imports are not always our friend.

• • •

Out of 120 million tons of steel used in the United States this year, about 30 million of it is being imported.

So, in simple calculations with all things being equal, "We could employ 30 percent more people if all the steel were produced here," Campo said. "And frankly we have the capacity for it."

Beyond capacity, the domestic steel industry contends it has competitive advantages over foreign imports as well, including a much quicker supply chain.

A construction company in the Midwest ordering steel from Turkey might have to wait 90 days for a delivery. "We'd like to get steel delivered in nine days — or nine hours if we can," Campo said. "The economics of construction are driven by schedule."

Such competitive advantages may not matter, however, unless U.S. steelmakers are better able to compete with foreign producers.

The Steel Manufacturers Association has complained about "unfairly traded exports" as it argues a prominent rebar trade case against Turkey, Japan and Taiwan. The association has singled out aggressive state intervention by foreign governments, notably China, as "perhaps the greatest threat to the U.S. steel industry."

With the Chinese government giving its own steelmakers subsidized land, tax reductions and other benefits, Chinese steel production between 2001 and 2014 grew about seven times the growth in production in the rest of the world.

But access to the U.S. market enjoyed by Chinese, Korean and Turkish producers hasn't gone the other direction. U.S. steel exports to China have fallen since 2008 as China has made "a deliberate attempt to exclude foreign steel products from its domestic market," the U.S. trade group maintained.

Though Gerdau is based in Brazil, it generates nearly 50 percent of its revenue from its North American operations. Executives in Brazil have said they're not worried that a Trump administration will dramatically change the North American Free Trade Agreement in a way that hurts its business.

• • •

From more than a half million workers in the 1970s, the U.S. steel industry has shrunk to roughly 150,000 jobs.

In Florida, Gerdau employs 1,000 people, including 500 in Tampa Bay and 300 at its Jacksonville plant, the last remaining steel mill in Florida.

"You're talking about middle-class jobs," Gerdau spokeswoman Kim Selph said. "They're making between $50,000 to up to $100,000 making steel."

Yet even if all their woes with importers disappeared, that doesn't mean all the steel jobs lost through the decades would be coming back. Nor that the steel industry will still need as many jobs in the future to get the same results.

That's because this is a much less labor-intensive industry than it used to be. Increased productivity and improved technology has contributed to much of the shrinkage in jobs.

Some steelmakers have also blamed environmental regulations for making production more costly and leading to job cuts elsewhere to remain profitable.

Yet environmental rules that are more stringent than those imposed by foreign imports could prove to be a positive for the U.S. industry.

In fighting global warming, one major concern is carbon dioxide emissions from the domestic steelmaking process, but there is another often overlooked concern about the much higher emissions of steel products manufactured overseas.

Imported steel made under more lax environmental rules and shipped across the globe releases up to 10 times more carbon dioxide into the atmosphere by the time it arrives in the U.S. Any international agreements that force some steel importers to cut back on CO2 emissions would be a plus for domestic steelmakers already operating under such restrictions.

The biggest driver in the future of the steel industry, Campo said, could be what happens with environmental regulations internationally.

• • •

The slogan "Steel Proud" began as an internal, morale-boosting campaign in Gerdau five years ago. More recently, it has taken on a broader meaning as steelmakers push back against a perception that their industry is withering.

Steel has been resilient as a commodity of choice used in beams, railways and roads, in car axles, shafts and transmissions. The industry touts demand for steel as relatively stable at well over 100 million tons a year.

"The beautiful thing about steel is it never goes obsolete," Campo said, contrasting it with the latest cellphone technology that's going to be replaced by something better down the road.

"A lot of people think the steel industry is dead in America. It's certainly not," he said. "They think of it as a dirty industry and a bygone era, and it's not that. . . . We're here and we're operating and we expect to be operating for a very long time."

Contact Jeff Harrington at jharrington@tampabay.com. Follow @JeffMHarrington.

   
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