Tariffs Driving Limited Increase in Supply

Rising prices for steel and aluminum are driving up the value of shipments and orders of metals produced at U.S. plants but show little sign of substantially boosting the quantity of metals being churned out of U.S. factories or the number of workers producing them.

The value of manufacturers’ new orders for primary metals, which is mostly aluminum, iron and steel products, grew 18 percent in July from the prior year, continuing an upward march that began in the fall of 2015, the Commerce Department said. The value of shipments for those manufacturers also rose 18 percent from a year earlier.

The increases in large part reflect substantial price growth for steel, aluminum and iron so far this year. Steel prices in July were up 19 percent from a year ago and aluminum prices were up 18 percent, according to the Labor Department.

Meanwhile, employment in the primary metals-producing industry grew 2 percent in July from the prior year, matching job growth seen in the overall economy.

Recent earnings reports from major U.S.-based metal-producing companies like AK Steel Holding Corp., Alcoa Corp. and U.S. Steel Corp. show solid earnings growth, stemming in part from rising prices.

Alcoa Chief Executive Roy Harvey said in a recent earnings call that tariffs “are driving only a limited increase in supply” in the aluminum market. He said Alcoa is restarting a portion of an idle aluminum smelter in Indiana, but the company has made no moves to restart an idle plant in Washington State.

In related news, the Australian owner of North Star BlueScope Steel said it plans to invest up to $700 million at its Delta, Ohio, plant to expand the mill’s production by another 600,000 to 900,000 metric tons per year.

Sources: Wall Street Journal, The Blade