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A recent survey of Arkansas businesses revealed the firms' reliance on imported metals and how much proposed U.S. duties on imported steel and aluminum could affect them.

The Arkansas District Export Council and the World Trade Center of Arkansas sent a survey to Arkansas companies on March 15, before certain trade exemptions were outlined and China responded with its own list of proposed tariffs on U.S. products.

Melvin Torres, director of Western Hemisphere trade for the World Trade Center, said the survey is a bit dated, but the responses remain relevant because "we import our steel from China," and additional retaliatory tariffs would hurt business.

Torres co-wrote the report on survey results and released a summary to the Arkansas Democrat-Gazette on Friday.

The 93 companies responding to the questionnaire said they used imported steel or aluminum.

The main reason they gave for purchasing imported aluminum and steel, according to the survey, is a tight domestic supply. Almost half of the surveyed companies mentioned that in the comment section. About 13 percent said they "have no alternative to imports."

Alan Ellstrand, associate dean of the Sam M. Walton College of Business at the University of Arkansas, Fayetteville, said the businesses that responded are "feeling the pinch" and foresee price increases for consumers.

Canada exports the most steel and aluminum to the United States, but most of the steel and aluminum imported to Arkansas is from Mexico or China, the report said.

Of the companies responding to the survey, 63 said they import steel or aluminum from China, 40 reported imported metal from Mexico and 29 from Canada. Several companies also reported purchasing imported metals from Japan.

Torres was surprised by some of the responses. Imported steel makes up almost 50 percent of the tires made by the state's manufacturers, he said.

If proposed tariffs are approved, tire-makers are going to pass the increased costs on "somehow to someone," Torres said.

Banks, real estate firms and farms reliant on these companies and their supply chains would also be subject to higher prices, Torres said.

Companies are bracing for rising metal prices, according to the survey. Nearly 40 percent estimated that their costs will rise, 34 percent said there will be a negative effect on business, 16 percent mentioned the possibility of layoffs, and "only 10 percent ... said the tariffs will have no impact on their business."

Business on 04/14/2018

Print Headline: State firms report metal-imports use

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  • RBear
    April 14, 2018 at 8:07 a.m.

    Tight domestic supply is something that can be fixed, but will take time. In looking at some industry outlooks on the domestic steel industry, I found some interesting insights on the state of the industry. One point validated the responses to the survey.
    From one report, "One of the more significant reasons domestic steel prices continue to rise is because of manufacturing capacity. Simply, there just is not enough manufacturing capacity for a broad spectrum of steel products, including in the construction industry, to keep up with demand.
    "With that noted, major steel manufacturers have plans to expand their production facilities in 2018. The result of this step will be to bring more finished steel onto the market, with the associated effect of notching down prices, at least to some degree. Another recurring and pervasive issue impacting the price of steel arises from weather-related manufacturing plant closures. This does happen every year. However, the number of plant closures associated with weather was higher in 2017. These closures contributed to the overall increase in the price of domestic steel, an impact that is still being felt as we move into 2018."
    As can be seen, even with the tariffs the price of steel will not improve domestically as the supply chain problems need to be addressed. In fact, several experts warn that building prices and manufacturing will start to see an uptick on the price of goods manufactured as costs are passed along to consumers.