What will the consequences be from President Donald Trump’s steel and aluminum tariffs for Florida’s construction industry?
The answer: It depends, based on your sector, reliance on steel and from where the steel is imported, if at all. In fact, if you are in central Florida, the protectionist policies may create business opportunities for you.
Data indicates that Florida, despite its large and growing construction industry and steel requirements, will not be as badly affected as some other states.
This in part is because Nucor is building a $240 million rebar micro mill in Frostproof, Polk County, a project the steel maker originally announced in November, 2017, but confirmed in March when Trump announced the tariffs.
“Nucor has always focused on growing our business to better serve our customers,” John Ferriola, the company’s president and CEO, said in a statement. “We are building this rebar micro mill in a great and growing market where demand is strong and there is currently an abundant supply of scrap, a good portion of which is handled by our scrap business.”
“Consistent with our planned strategy of being a low-cost producer, this micro-mill will give us a cost advantage over our competitors who are shipping rebar into the region from long distances.
Nucor expects the mill, which will employ about 2,500 workers, will have an annual capacity of 350,000 tons on a 400-acre site on US 27.
“There hasn’t been a project of this size in many years,” Sean Malott, executive director of the Central Florida Development Council, was quoted as saying in the local newspaper, The Ledger. “This is the biggest manufacturing property Polk County has had the chance to compete on.”
The Polk County Commission has approved property tax and impact fee breaks worth about $150 million.
Malott said Nucor officials were looking for a site with more than 300 acres, railroad access, and access near a major electricity substation that could provide enough power to operate the plant.
A Nucor spokesperson declined to provide information about how/whether the company is selecting design and engineering consultants, or a general contractor/construction manager, saying simply: “Unfortunately, we do not have additional details to share at this time.”
Data from the Brookings Institution shows that Florida, despite its size, does not have a disproportionate share of steel and aluminium imports. The list is topped by Missouri (which is also getting a new Nucor rebar mill), Louisiana, Connecticut, Maryland and Arkansas.
On the other hand, the data indicates that the number of workers directly employed in steel and aluminum production in Florida, a total of 1,803 (before the Nucor hirings, of course) are dwarfed by the 194,655 workers employed in industries that use the metals.
Nationally, and in other states, there is real anxiety about the potential tariff impacts, even though Canada and Mexico remain exempt under the North America Free Trade Agreement (NAFTA). While Trump has indicated he isn’t happy with the agreement, recent negotiations indicate the three countries are moving towards a settlement.
However, Stephen E. Sandherr, chief executive officer of the Associated General Contractors of America (AGCA), says the tariffs will be harmful.
“These new tariffs will cause significant harm to the nation’s construction industry, put tens of thousands of high-paying construction jobs at risk, undermine the president’s proposed infrastructure initiative and potentially dampen demand for new construction projects for years to come,” he said in a statement. “That is because the newly imposed tariffs will lead to increases in what construction firms are forced to pay for the many steel and aluminum products that go into a typical construction project.”
“Firms that are already engaged in fixed-price contracts may be forced to absorb these costs, forcing them to cut back on new investments in equipment and personnel. Higher steel and aluminum prices will make the kind of infrastructure work President Trump supports more expensive, forcing federal, state and local officials to cut back on projects they can fund. And the likely trade war these new tariffs prompt will diminish demand for private investment in infrastructure as well as construction demand for manufacturing, shipping and distribution facilities.”
“Considering the damages these new tariffs will inflict on the construction industry, it is easy to understand why recent, independent studies estimate that nearly 30,000 construction workers will lose their jobs because of these new tariffs,” he said.
These fears are manifesting in other southern states, especially North Carolina (where Nucor has its headquarters).
There, Carolinas Associated General Contractors (CAGC) president Dave Simpson said steel price increases will be costly, as the metal is used everywhere in construction, including concrete (as rebar), bridges, to make the structure of buildings, for beams, in staircases, interior walls and hardware.
Most of North Carolina’s steel comes neither from the NAFTA countries or China – the state imports most of its steel from Brazil, reaching $52 million in 2017.
Nucor, based in Charlotte, recently raised its prices by $45 per ton.
Overall, the message from the American Institute of Steel Construction (AISC), representing the steel industry, is that the tariffs won’t really cause that much hardship, while other associations have been speaking loudly to say it will harm the construction industry and stall development.
In a statement, AISC says: “As for the price impact of a tariff on steel projects, the answer is that it will depend.”
“However, a 25 percent tariff on imports would not mean a 25 percent increase on the overall cost of a project. First, the cost of material is just one of several components in the cost of a steel structure. And while percentages vary from project to project, even if the full impact of a 25 percent tariff on material cost was passed on to a project, it would likely impact the cost of the steel package by five to 10 percent, and the total project cost by less than two percent.”
However, AISC acknowledges there could be other consequences because steel prices don’t operate in isolation. The association noted for example, that in the past four years, the index cost of ready-mixed concrete has increased by 17 per cent, while the indexed cost for steel has declined. “And to the extent a tariff applies to rebar imports as well as structural products, it will also affect overall costs for concrete. So, on any individual project, the actual impact of a tariff will need to be evaluated against overall market factors just like any other volatility in material costs.”
Meanwhile, the National Association of Home Builders (NAHB) said in a statement that the steel tariffs will be costly.
“Given that home builders are already grappling with 20 percent tariffs on Canadian softwood lumber and that the price of lumber and other key building materials are near record highs, this announcement by the president could not have come at a worse time,” said NAHB chairman Randy Noel.
“Tariffs hurt consumers and harm housing affordability. We hope the administration will work quickly to resolve these trade disputes regarding lumber and steel so that businesses and consumers have access to an adequate supply at a fair market price,” Noel said.