Steel Tariffs Hit Product Pricing

June 7, 2002
Electrical manufacturers are getting hammered by the steel tariffs that the Bush Administration imposed earlier this year on many imported steel products,

Electrical manufacturers are getting hammered by the steel tariffs that the Bush Administration imposed earlier this year on many imported steel products, and are now passing along those price increases to electrical distributors and independent electrical manufacturers' reps.

Manufacturers of products with high steel content such as fittings, conduit, strut and enclosures stand to be hit hardest by the tariffs. Del Auray, president, Bridgeport Fittings, Stratford, Conn., said his suppliers of steel coil are looking for increases of up to 20 percent.

“Price increases have just started to be imposed on us by our suppliers,” he said. “We will have no choice but to try to pass those along to our customers at some point. We source EMT-type steel fittings overseas and they are definitely subject to the 13 percent tariff on tubular steel products. We must raise our steel fittings prices to offset this charge.

“We also are large consumers of steel coil. Our domestic suppliers of this coil are looking for an increase of as much as 20 percent. Once certain contracts expire, new orders will be priced much higher. Our suppliers of fitting components, such as screws and gland rings, have not passed along increases to us yet, but I strongly believe that they will. The end result may be higher prices to distributors for steel fittings.”

Gary Brusacoram, principal, Andrews-Johnson-Brusacoram, Minneapolis, saw a similar situation in the silver market years ago.

“No one has managed anything like this since the silver fiasco of 20 years ago,” he said. “The imposition of the tariffs seems to be so selective. There are folks having trouble comprehending why one product is going up in price while others remain the same.

“With the contractor especially, he's already written contracts and now he's got a selling job to do with his customers. This won't be fun for anyone. It's a price pass-through more than a price increase. Everyone that competes in like products will have to show an increase in price to the marketplace — that will be the immediate impact.”

Nick Cassella, vice president, global marketing, electrical division, Thomas & Betts, Memphis, Tenn., agrees with Brusacoram that it's a “pass-along” rather than a price increase.

“As a manufacturer, we aren't gaining any margin as a result of the price increases. We strictly calculate the amount of material in the product and compare that to the tariff amounts and come up with the increased prices we pass along. We are already seeing the increased prices particularly as they affect steel box, strut, PVC-coated conduit and coupling products.”

He said the long- and short-term results of the tariffs on imported steel are “entirely at the hands of the steel industry.”

“If history is any indicator, however, they will sit there while they're being protected by the federal government and milk the profits. When all is said and done, if they remain as antiquated and inefficient as they have been, the importers will come back and bankrupt them.”

The three-year schedule of tariffs imposed by Bush calls for up to 30 percent tariffs on imports of plate, hot-rolled sheet, cold-rolled sheet, and coated sheet steel, as well as on tin mill products, hot-rolled bar and cold-finished bar. In addition, on April 30, the Department of Commerce released preliminary anti-dumping duty determinations on a range of mills worldwide. These will be implemented over and above the 30 percent tariff for those countries covered affected.

Malcolm O'Hagan, president, National Electrical Manufacturers Association (NEMA), Rosslyn, Va., said some of his members are feeling the tariffs more than others. Some of the products he cites include motors with a heavy steel content, silicon electrical steel, arc welding equipment, and to a lesser extent transformers and other power equipment.

“Some of our manufacturers have already indicated they are experiencing delays in shipments and increased prices,” said O'Hagan, who has been a vocal opponent of tariffs for years. He believes European steel manufacturers may retaliate.

“The bottom line here is that the tariffs represent a bad economic policy. The last thing you want to do is to put a tariff on a base product like steel. Tariffs are always a negative. We at NEMA are for the elimination of all tariffs. They distort the free flow of goods. The quicker they are taken off, the better off we'll be.”

Two electrical manufacturers representatives don't see anything wrong with increased prices on steel products. “The tariffs mean that there will be price increases for all products where steel is used,” says Galen Hollar, president, Burrus and Matthews, Inc., Irving, Texas. “Think of all the products we sell that will be affected and that means we'll be selling more expensive products — that's good for us commission guys.”

John Roth, principal, Roth-Mooney Electrical Agency, Indianapolis, agrees. “For the first time in my career in the electrical industry, we're actually getting an increase in steel conduit and steel fittings, and people actually believe the reason for the increase. In my view this is good for reps and electrical distributors.”