Biden’s Buy American provides a new vehicle for dealing with an old sector — Panjiva

Supply Chain Research

Biden’s Buy American provides a new vehicle for dealing with an old sector

Materials - Metals/Mining 753 Metals - Steel 515 Mexico 884 Tariffs 1797 U.S. 5321 USMCA 456 WTO 114

President Biden has published an eagerly-awaited “Buy American” Executive Order that starts to set the framework for support for the development of critical U.S. supply chains. From a practical point of view, 97% of U.S. federal contracts already go to U.S. firms, according to the U.S. Chamber of Commerce, with these regulations set to tighten tier-2 supplier rules of origin. 

Details will only merge following the creation of a “Made in America” office in the OMB and with the appointment of a director responsible for implementing the revised policy.

One limitation to delivering a meaningful change to a breadth of industries will be limited by many critical supply chains resting largely in private sector hands. Additionally there’s also the risk of challenges to the new policies under the WTO’s Government Procurement Agreement as well as under USMCA, both of which could delay implementation or raise planning uncertainties.

As outlined in Panjiva’s research of Jan. 24 there will be tests of the Biden administration’s attitudes towards both the WTO in relation to steel and towards USMCA as a result of the Executive Order. On the latter, Canada has already expressed concerns according to Reuters.

No specific targets or product list is provided in terms of domestic content, instead Federal Acquisition Regulatory Council will carry out a 180 day process to set new rules. 

There is, however, specific reference to steel and in particular “dumped steel, iron, or manufactured goods or the use of injuriously subsidized steel, iron, or manufactured goods“. That indicates a preoccupation with infrastructure investments ranging from railways and roads to energy networks and wind turbines.

Panjiva’s data shows that U.S. imports of construction rebar, structural steel products, pipes and rail tracks have dropped by 29.9% year over year in the 12 months to Nov. 30. That’s likely to be the result of a mixture of the impact of reduced demand during the pandemic as well as the impact of tariffs applied by the Trump administration.

Imports from Canada and Mexico have done better than average with a decline of 6.2% in part reflecting the earlier exemption from section 232 duties applied as part of the USMCA deal negotiations. Shipments from Europe (EU, EFTA and U.K.) meanwhile declined by just 19.6% and remained the second largest source of materials after Canada and Mexico.

Imports from Asia have fallen more quickly, with shipments from China down by 37.2% year over year and by 51.7% compared to 2016 as they have also generally faced section 301 duties too.

Steel demand down on tariffs, pandemic

Chart segments change in U.S. imports of structural and similar steel products by origin. Source: Panjiva

Exporters of infrastructure-type steels to the U.S. may see their access reduced further as a result of the stricter Buy American rules while importers will inevitably face higher costs. Assuming a carve out for Mexico and Canada isn’t achieved, the largest exporters from Mexico to the U.S. of the structural steels mentioned include Tenaris, Deacero and Industrias CH.

Shipments linked to Tenaris, led by shipments of oil / gas pipes,  dropped by 28.4% year over year in the three months to Nov. 30, likely reflecting the broader downturn in the oil and gas industry. 

Deacero meanwhile, which ships a broad range of rebar and other construction steel materials has experienced a surge in shipments of 88.6% year over year.

By contrast Industrias CH, which also focuses on construction steel, has seen a slide of 70.1% after peaking over the summer. That may reflect a focus on specific projects or asset types.

Deacero bucks downtrend in Mexican structural steel exports

Chart segments change in Mexican exports of structural and similar steel products to the U.S. by consignee on a monthly and three-month average basis. Source: Panjiva

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