Though steelmaker stocks rose sharply after President Donald Trump announced steep tariffs on aluminum and steel from overseas, energy companies and pipeline makers will likely take a hit.
The U.S. oil and natural gas industry depends on specialty steel for many of its infrastructure projects, and U.S. steelmakers don’t supply it, said Jack Gerard, the CEO of the American Petroleum Institute, a trade association for the industry.
“The actions taken today are inconsistent with the administration’s goal of continuing the energy renaissance and building world class infrastructure,” Gerard said.
The administration said Thursday it would slap a 25 percent tariff on imported steel and 10 percent on imported aluminium, beginning next week.
Even before the announcement, opponents had voiced concerns that tariffs could raise prices for all kinds of consumer and commercial goods made from aluminum and steel.
There are also doubts that U.S. steelmakers would be able to handle higher volumes and produce all grades of steel necessary for industrial production.
The thickest energy pipelines use a grade of steel that is produced abroad. When President Trump signed an executive order approving the Keystone Pipeline last year, he made headlines by also mandating that steel for future pipelines will need to be “made in the USA.”
At the time U.S. steelmakers said they had the capability to produce the steel, they just needed time to increase their output. They argued that foreign competition and anti-competitive trade practices have put them at a disadvantage for years.
“The real question is whether the U.S. steel industry has the capacity to supply every pipeline project in the United States,” said Libby Toudouze, portfolio manager at Cushing Asset Management. “Let’s say in 2017, 2018 we need 300 miles of pipeline and the U.S. steel companies’ maximum capacity could crank out 100 miles of pipe. It’s not reasonable for us to hold up the 200 miles of pipeline because the U.S. guys can’t scale to get there,” she said.
