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061218-nws-canadian-minister

Bismarck City Commissioner Steve Marquardt, left, greets Amarjeet Sohi, Canadian Minister of Infrastructure and Communities, before a luncheon meeting with local business and government leaders at the Bismarck-Mandan Chamber of Commerce on Monday.

Canadian representatives made the rounds in Bismarck Monday, aiming to drum up support from industry for renewal of the North American Free Trade Agreement.

At the end of May, President Donald Trump imposed tariffs on Canadian, Mexican and European Union steel and aluminum. The Canadians have since countered in kind, with more retaliatory tariffs threatened by the end of this month.

“We should be removing barriers not creating barriers,” Canada’s Minister of Infrastructure and Communities, Amarjeet Sohi, told members of the state and local chambers of commerce on Monday.

But even before tariffs were enacted, companies had been dealing with a rising price of steel for months as President Donald Trump made threats and the futures market reacted.

“The market for steel globally has very much fluctuated the last nine months,” said Doosan Bobcat CEO Rich Goldsbury, pointing to the unsettling nature of comments made by the administration, which have made planning more difficult. “What it’s done is created a great deal of uncertainty in regard to overall costs.”

Steel is a major part of Bobcat’s products. The workers do a lot of fabricating and welding, making parts from coil steel, 75 percent of which it sources from the United States, bringing in the remaining quarter from Canada.

Because Bobcat is able to buy large quantities of steel in advance, it has been able to lock in prices for the year, according to Goldsbury.

“Even though we fabricate a lot, we use third-party companies for those we can’t build,” he said. “The sad part of it is it affects them faster than it does us.”

That’s forced several of these suppliers to request upward price adjustments, However, due to the competitive nature of Bobcat’s industry, with many of the company’s opponents based overseas and not facing tariffs, Bobcat has very little ability to increase prices.

While Bobcat gets most of its steel in the U.S., domestic prices have risen as national steel suppliers have found themselves with less competition. Prices have gone up about 40 percent in the past nine months for those unable to lock in long-term price contracts.

“It did create some artificial demand from panic buying,” said Jim Deichert, vice president of supply chain for Dickinson-based manufacturer Steffes.

Deichert said he is hopeful the market will relax by this fall. But without renegotiation of NAFTA, he doesn’t expect prices to get back to previous levels.

“We’ve certainly been hit; our margins have been hit quite hard,” said Deichert, adding that a portion of that cost had to be passed to customers. “If nothing changes, we’ll have to re-evaluate our pricing again.”

Beyond just raw steel, Steffes has seen increases in what it pays for residual products containing steel — fittings, valves, even electronics.

Luke Richter, operations manager for structural steel at TrueNorth Steel, said his company has been able to wrap the price increases into its construction bids rather than taking a hit, but it has caused clients to think twice about whether or not to launch projects.

He said the amount of time steel mills will guarantee a price point has also shrunk. Some mills used to give TrueNorth a six-month guarantee on a price quote. Now, some are short as one month.

The tariffs could trickle down to other industries, such as agriculture, Goldsbury said. With crop prices low, farmers would be less likely to purchase a piece of Bobcat machinery if it were more expensive.

And farmers have their own worries about retaliatory tariffs.

Consul General of Canada Paul Connors said the list of potential retaliatory tariffs doesn't include raw agricultural products but some processed food could be affected.

Jessie Pfaff, of the North Dakota Department of Agriculture, said, as NAFTA is being negotiated, agricultural producers have raised concerns about wanting reduced tariffs on a number of their goods — dairy, wheat, barley and feeder cattle sent to Canada.

While Canada has expressed unwillingness to do away with the tariffs on dairy, he pointed to the country's dairy tariff reductions in the Trans-Pacific Partnership negotiations as evidence it knows it has to be more flexible, according to Connors. 

"I think there will be some progress there to open up more," he said.

Goldsbury said while some of the things that have come out of Washington, D.C., have been good for business, such as the Republican tax bill, the tariffs have taken them two steps back and brought more uncertainty than his industry has seen in the past decade.

Reach Jessica Holdman at 701-250-8261 or jessica.holdman@bismarcktribune.com

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Business Reporter