The Cleveland-based company said an unfavorable ruling from the International Trade Commission was behind the move.
Last year, Cleveland Cliffs and the United Steelworkers petitioned the U.S. Department of Commerce to declare unfair trade practices on foreign tin and chromium coated sheet steel products.
Commerce then imposed tariffs on four countries: Canada, China, South Korea and Germany. However, the International Trade Commission rejected the tariffs earlier this month.
Cleveland Cliffs said the plant’s workers would be offered opportunities to transfer or receive severance.
West Virginia’s U.S. senators reacted negatively to the Cleveland Cliffs announcement.
“While little consolation to the hardworking men and women facing this incredible loss – and to the Weirton community at large – I fought to sustain operations there since learning of Cleveland Cliffs’ and the United Steelworkers’ concerns with unfair trade practices last year,” said Republican Sen. Shelley Moore Capito. “As I have said before, the U.S. Department of Commerce’s final decision announced in January demonstrated our government’s recognition of the damage these unfair trade practices have had on America’s domestic tin mill production and its workers.”
“Today’s announcement is a consequence of the International Trade Commission’s decision to turn a blind eye to nearly 1,000 hard-working employees right here in West Virginia in favor of illegally dumped and subsidized imports,” said Sen. Joe Manchin, a Democrat. “Cleveland-Cliffs’ closure is an absolute injustice not only to American workers, but to the very principle of fair competition, and it will undoubtedly weaken our economic and national security.”
As President Donald Trump addressed farmers at a national conference Monday Ohio Valley agriculture leaders said they are standing by his effort to renegotiate trade deals. But some leaders cautioned that costly tariffs on farm products need to end soon.
President Trump doubled down on his fight for better trade deals during his speech to American Farm Bureau Federation members at their convention in New Orleans.
“We’re turning all of that around with fair trade deals that put American farmers, ranchers and in fact put America first,” Trump said.
Farm Bureau leaders said the organization is behind the president but expressed concern that continued tariffs on American farmers are taking a toll.
“If we had our way, we’d get a great resolution, and we’d have it tomorrow,” Ohio Farm Bureau spokesman Joe Cornely said. “So we’re reminding the administration that we need these problems resolved as quickly as possible.”
U.S. soybean exports to China normally bring in $14 billion a year but have plunged because of the tariffs. Trump administration officials plan to continue negotiations with China in early February.
Credit Nicole Erwin / Ohio Valley ReSource
/
Ohio Valley ReSource
Soybean farmer Jacob Goodman watches prices for his crop drop.
American Soybean Association President Davie Stephens, a Kentucky farmer, said soybean farmers also want a quick resolution to the trade dispute. But Stephens says the situation has also helped Ohio Valley farmers realize they were too invested in China.
“It’s opened up soybean farmers’ eyes and farmers’ eyes in general,” he said. “We put all of our eggs in one basket, so to speak.”
Stephens said he hopes for a trade agreement before the Trump administration’s deadline in March when tariffs on $200 billion of Chinese goods increase from 10 percent to 25 percent.
President Donald Trump’s desire to help boost the Ohio Valley’s energy industry and bring back mining jobs could be stymied by the administration’s escalating trade battle with China and other trading partners across the globe.
The Trump administration announced in June $50 billion in tariffs on Chinese goods, which are set to go into effect on Friday. In return, China has committed to its own $50 billion in tariffs on U.S. exports, which may include U.S. energy exports.
Shortly after China’s announcement that it would respond in kind, the White House pledged to impose even more tariffs on an additional $200 billion worth of Chinese goods, escalating fears that the two countries will become locked in a full trade war.
Experts say escalating tensions could dampen the growth of metallurgical or “met” coal exports from Appalachia and have a major impact on planned Chinese investment in the region’s natural gas industry.
Credit Jeff Young / Ohio Valley ReSource
/
Ohio Valley ReSource
A coal barge on the Ohio in Louisville.
Met Market
Metallurgical coal has been a rare bright spot for the mining industry. Production of thermal coal in Appalachia — the type of coal burned to make electricity — is extremely unlikely to rebound because of low natural gas prices, the rise of renewable energy and lower-cost coal options produced in the Powder River Basin region of Wyoming and Montana, said John Deskins, director of West Virginia University’s Bureau of Business and Economic Research. Since 2008, annual coal production in West Virginia alone has dropped by nearly half, from almost 158 million short tons in 2008 to 80 million short tons in 2016.
But production of metallurgical coal, or met coal, has remained relatively stable.
“All the losses that we’ve seen in recent years have come from thermal coal production,” Deskins said. “The stable part that we have going forward, the part that we can count on, is the met coal.”
Credit Peabody Energy, Inc., via Wikimedia Commons
In 2016, metallurgical coal production ticked upward in Appalachia, in part because the global price of met coal increased due to weather-related issues in Australia, China’s biggest supplier of met coal. Higher prices made Appalachian met coal more competitive. As a result, China has been importing more steel coal from West Virginia and other Ohio Valley producers.
“We sent 3.2 million tons to China last year. Before that we sent less than a million tons,” said Taylor Kuykendall, a coal reporter for S&P Global Market Intelligence.
Kuykendall said in the grand scheme of China’s $22 billion demand for coal, what it gets from West Virginia and other Appalachian states isn’t huge. But it is growing, and perhaps more importantly, it could grow more. Importing more U.S. coal is one way Chinese officials could reduce the Chinese-American trade deficit.
“Their government can order producers and metallurgical coal consumers to buy more U.S. coal and they can do the same thing with thermal coal and we were starting to see evidence that they were doing that,” he said.
For example, an executive for Pennsylvania-based Consol Energy, said recently that Chinese officials expressed “immediate” interest in a new 1 million ton coal contract. The West Virginia Coal Association in May said China had approached them with interest in an additional 7 to 8 million tons of met coal from West Virginia.
However, as trade tensions have mounted, some Chinese traders have expressed relief they no longer have to seek out more expensive U.S. coal imports as a result of rising tensions, according to reporting by Reuters.
“These kind of back and forth on tariffs maybe haven’t quite ruined that opportunity yet, but it seems like it has at least slowed it down or created enough threat of a concern that people are kind of backing off on some of those deals,” Kuykendall said.
Deskins, at WVU, expressed a more dire concern, especially for West Virginia, which is the country’s largest producer of metallurgical coal. He said it’s not just retaliatory tariffs from China that could hurt the region’s coal production. Europe, Canada and Brazil are big importers of West Virginian coal — countries that have also threatened to impose retaliatory tariffs as trade war talk escalates.
“I think the retaliatory tariffs could really damage West Virginia coal exports,” he said. “To be very frank, I think we need to be really concerned about a trade war that could spring up because I think it could really hurt the West Virginia economy.”
Credit White House video
/
From White House video. Coal miners flanked President Trump as he signed the executive order undoing the Clean Power Plan.
Gas Deal Burned?
It’s not just the coal industry that could suffer. An $84 billion planned regional investment from China’s largest energy company has slowed, at least temporarily, due to Trump’s tough talk on Chinese trade.
Last year, China’s largest partially state-owned energy company, China Energy, signed a nearly $84 billion MOU with the state of West Virginia to build a series of facilities that would process natural gas liquids and its byproducts.
Natural gas liquids are full of things like ethane, propane and butane, chemicals that are the backbone for the petrochemical industry. State officials in Ohio, Pennsylvania and West Virginia hope an investment in a storage and trading hub, as well as pipeline infrastructure, will lure big players in the petrochemical industry to the Ohio Valley and help the region become the next “petrochemical hub,” or plastics production mega-center of the U.S.
“There’s so much of these natural gas liquids being produced in the Appalachian Basin that there is a tremendous oversupply,” said Brian Anderson, head of WVU’s Energy Institute.
It’s already starting to happen. Royal Dutch Shell is building a $6 billion cracker plant in Beaver County, Pennsylvania. PTT Global Chemical is in the permitting process for an ethane cracker in Belmont County, Ohio. Cracker plants “crack” or separate and convert natural gas liquids into ethylene, a feed stock for plastics.
China Energy’s multi-billion investment would be similar.
“China Energy has a tremendous interest in investment in the petrochemical sector in Appalachia,” Anderson said. “Their interest is fitting in within that supply chain.”
Stood Up
For the last few months, Anderson has been out with China Energy representatives dozens of times, scouting for locations to begin building projects. Last month, officials were supposed to stand with him at the Northeast U.S. Petrochemical Construction Conference in Pittsburgh to announce the first set of projects.
Instead, he stood alone. The reason: Trump’s tough trade talk with China.
“It’s a government-owned company in China, a state-owned enterprise that is part of that political structure and with the bilateral tensions between the U.S. and China, for the executive level officials from China Energy it was not an appropriate time for them to come for an official visit,” Anderson said.
He added he is confident the deal is still on, but don’t expect to hear any big announcements until tensions between Trump and China have cooled.
Trump’s tariffs are affecting the region’s natural gas industry in another way. A 25 percent tariff on imported steel and aluminum is in some cases driving up the costs of the materials used to make natural gas pipelines and other infrastructure. That, in turn, drives down the return on investment in natural gas infrastructure.
“The actual economics of the project can be affected through the enacting of certain tariffs, and a steel tariff does in fact change the economics of constructing $83 billion worth of facilities,” Anderson said, referencing China Energy’s investment. “So, those economics are factored into the decision making when it comes to the final investment decision, and that’s one that is a pretty straightforward calculation.”
About 2,000 people gathered in Pittsburgh last month for two gas and petrochemical industry conferences. Despite those numbers, people noticed who wasn’t there: investors from China. Participants discussed the impacts of tariffs, best practices and hiring.
Tariffs
West Virginia University’s Brian Anderson had the job of letting everyone know that Chinese government’s China Energy would not be on hand to talk about their $80 billion plus investment in West Virginia. Why? Tariffs.
At both the Northeast Petrochemical Construction and the Hart Energy DUG East conferences international trade was major topic of discussion. For petrochemical producers — notably the businesses that take natural gas and crack it into ethylene that ultimately shows up in plastics — tariffs are becoming a concern.
“We’re going to have an oversupply,” said Taylor Robinson, the president of PLG Consulting. “The relief valve for that is exports.”
During his talk, Robinson highlighted increased production, including new plants coming online in the region. He said one of the biggest risks to growth right now are escalating tarrif threats.
“China has put a big tariff on imported polyethylene,” Robinson said. He added that has thrown a “big wrench” into many Gulf Coast producers’ plans to export to China, the largest market in the world for polyethylene.
“Never a dull moment,” he quipped.
And on the production side, U.S. steel tariffs are giving one Canadian pipeline firm pause.
Credit Nancy Andrews
/
Taylor Robinson, President of PLG Consulting, called tariffs one of “the biggest risks right now” for the petrochemical industry. He spoke at the Northeast Petrochemical Construction Conference in Pittsburgh June 19, 2018 at the Westin Conference Center.
Cale Johnson, traveled from Calgary with Canadian CORE Linepipe to work the floor. For him, these tariffs are having a “big time” impact.
“Our product is steel so we’ve been directly affected by the new tariffs,” he explained. “It’s increased our commodity price significantly so it’s been challenging. However all steel products are affected, so it’s just a challenge the whole industry is faced with.”
Johnson said ultimately, end users will have to pick up increased costs created by tariffs.
“If we are launching down here, we might have to evaluate American distribution or pipe that’s made in the states to possibly avoid those tariffs,” he said.
Best Practices
At Hart Energy’s DUG East, which brings together natural gas industry drillers, shippers and support businesses, much of the focus was how to better adjust to the current market — gas prices are low and production increasing. So, the question is: how do you drill smarter?
Credit Nancy Andrews
/
Benjamin Hulburt, Chairman, President & CEO, Eclipse Resources speaks at Hart Energy’s DUG East Conference in Pittsburgh June 20 & 21, 2018 at the Pittsburgh Convention Center.
Benjamin Hulburt and his company Eclipse Resources recently set records for the length of the “laterals,” or the horizontal distance from the vertical drill in a well pad, it has drilled. The company drilled out more than 20,000 feet (nearly four miles) from the well pad, but with low gas prices, Hulburt said the economics can be challenging.
“In today’s natural gas environment, if you are not the low cost producer, the low cost driller, you’re going to struggle to survive,” Hulburt explained. “You have to be constantly innovating, and constantly trying to drive down that cost curve if you are going to survive.”
Lots of conference attendees were optimistic about the future of the industry, despite the absence of Chinese investors and businesses. Shawn Quinton, from Oklahoma, works for a German company, Linde Engineering. The engineering firm designs and builds the plants that are essentially giant refrigerators that cool the natural gas so that it separates into the different gas types – methane, ethane and other derivatives Currently, they’ve got one job in the region, and he thinks he’ll get more.
Credit Nancy Andrews
/
Chris Allen, left, and Shawn Quinton, right, from Linde Engineering North America, Inc., ran out of business cards the first day of the conference. “There are a lot of regional people here that attend this that we don’t normal contact with, so this is an excellent opportunity to do some elbow-rubbing and handshaking that we wouldn’t normally see on a daily basis,” Quinton said. “And you just can’t walk up to their door.”
“We’ve had really good traffic,” Quinton said. “Unfortunately, I am just about out of cards… I brought 100. Tickled pink to have that problem. Next time we’ll stock up and make sure we bring 200.”
Workforce
There was also a lot of talk about jobs and training. Chevron’s Lee Ann Wainwright was part of a panel on STEM training and jobs.
She said the industry needs candiates with “basic life skills.”
“We just need people to show up,” Wainwright said when discussing hiring practices. “We need them to pass the drug test. We need them to be able to have a conversation, look you in the eye, and come on time.”
Credit Nancy Andrews
/
Lee Ann Wainwright, a Policy, Government & Public Affairs Advisor for Chevron said her company is looking for the “basic life skills as it relates to a job,” when looking at new hires. She participated in panel “Readying the Next-Generation for Careers in Advanced Manufacturing & Petrochemicals” at the Northeast Petrochemical Construction Conference in Pittsburgh June 19, 2018 at the Westin Conference Center.
Wainwright, who is a policy, government and public affairs advisor with Chevron, said her company looks to train employees on the job.
“Don’t get me wrong — there’s always going to be some jobs where you need that 4-year degree and maybe beyond — but a lot of jobs in the energy and manufacturing right now are skilled labor jobs and once you have the foundation and you are in the door, we can get you trained,” she said.
Along with workforce issues, trade wars and low gas prices that can affect growth, other issues surfaced. Community concerns and protests against drilling and pipeline construction is now a part of the industry’s equation.
There was some limited discussion on environmental issues such as leaking methane from gas wells and pipelines. That’s a big deal when taking into account the entire life cycle of natural gas and its impact on climate. And one speaker cited climate change with a different twist — the extreme weather events that hit Gulf Coast production areas. Coastal flooding regularly takes petrochemical operations offline. In comparison, Applachia’s weather is relatively tame, which could make the region a more reliable home for petrochemical production.
Nancy Andrews is a Pittsburgh based journalist and 2018 Alicia Patterson Foundation Fellow studying natural gas pipelines in Appalachia. Follow her on Twitter @NancyAndrews or @NancyAndrews on Instagram.
The Trump administration has made good on a promise to impose steel and aluminum tariffs on some major U.S. trading partners, including the European Union, Canada and Mexico.
The U.S. commerce department exempted the EU, Canada and Mexico from a 25 percent tariff on steel and 10 percent tariff on aluminum in March. Those exemptions were set to expire in May, but countries were given one more month. U.S. Commerce Secretary Wilbur Ross announced Thursday the exemptions were expiring and the tariffs will go into effect at midnight. The President is still able to cancel or extend those exemptions.
The move has major implications for the Ohio Valley, home to more than 220 steel and aluminum facilities. But other industries in the region could suffer from higher prices on raw materials and punitive tariffs other countries have pledged to impose targeting some of the area’s major export products.
Credit Becca Schimmel / Ohio Valley Resource
/
Ohio Valley Resource
The Century Aluminum smelter in Hawesville, Kentucky.
Aluminum On A Roll
The Ohio Valley still provides more than 44,000 jobs in the steel and aluminum industries despite sharp declines over the years due to foreign competition. Century Aluminum Executive Vice President Jesse Gary said President Trump’s decision to implement tariffs will increase U.S. production of aluminum by more than 60 percent by the end of the year.
“The goal of these tariffs was to restart U.S. production, to protect our national security as a country and to be sure we have some industrial base to service our military, to service our electrical grid and the other uses we have for aluminum in this country,” he said.
Century Aluminum is in the process of increasing production capacity at its smelter in Hawesville, Kentucky, which had earlier cut production and employment.
Credit Becca Schimmel / Ohio Valley Resource
/
Ohio Valley Resource
Brady Carwile applying for a job with Century Aluminum.
But Erica York, a Policy Analyst with the free-market think tank the Tax Foundation, said tariffs can carry a steep price for other U.S. industries. York said the Bush administration placed tariffs on steel for similar reasons and it ended up hurting workers.
“What we found then was that the higher prices of steel caused more American workers to lose their jobs than the number that were employed by the total steel industry itself at that time,” she said.
York predicts that while the industries protected by tariffs could see a bump in employment that is unlikely to last. In the long run, she said, the unintended consequences of the higher prices and job losses in other industries outweigh the short term benefits.
Credit Becca Schimmel / Ohio Valley Resource
/
Ohio Valley Resource
Maker’s Mark workers hand dip bottles in red wax.
Bourbon On The Rocks?
Another consequence of tariffs is the risk of retaliation by affected trading partners. The European Union has already indicated that retaliatory tariffs are coming. The EU filed a list of target US products, including agricultural goods and bourbon, something important for Senate Majority Leader Mitch McConnell’s home state.
There are 32 distillery companies in Kentucky selling to customers around the world, including liquor giant Brown-Forman, where Paul Varga is CEO.
“A company like Brown-Forman could be an unfortunate and unintended victim of a policy which in part is aimed at promoting something which Brown-Forman is a stellar example of, committed long term American manufacturing company,” Varga said during a quarterly earnings call in March.
Credit Becca Schimmel / Ohio Valley Resource
/
Ohio Valley Resource
Barrels of bourbon are stored and aged for about 5-7 years.
The Kentucky Distillers’ Association said bourbon and distilled spirits accounted for more than $450 million in Kentucky exports last year, and nearly half of that went to European Union countries.
Association President Eric Gregory said in a statement that the distillers remain hopeful that continued negotiations will avoid a costly trade war. Gregory added that bourbon is an $8.5 billion industry in Kentucky, generating 17,500 jobs.
Regional iron and steel industry leaders say they are disappointed by the Trump administration’s delay on a decision about which countries will face new import tariffs. President Trump has postponed until June a decision on which countries will be subject to new tariffs on steel and aluminum imports. The decision had been due May 1.
Nucor Corporation CEO and president John Ferriola was among the steel and iron industry representatives who discussed the delay in a press briefing on Tuesday. Nucor has facilities in Kentucky and Ohio. Ferriola said the delay is disappointing because it gives other countries more time to undercut domestic producers with unfairly priced goods, a practice known as dumping.
“By opening up another month what we’re doing is giving these countries another month,” he said. “These countries that have been dumping into our country get another month to get their steel into the country before the tariffs or quotas go into effect.”
Ferriola supports the president’s tariffs and said he is confident that there will be no more extensions.
Originally, Trump announced a 25 percent tariff for steel imports and 10 percent for aluminum. He then temporarily exempted the EU, Canada, Mexico, Argentina, Brazil and South Korea.
South Korea has secured a permanent exemption to the tariffs, but the U.S. is limiting South Korea’s steel exports by imposing a quota.
The pending decision will determine if the other countries, which include some of the biggest U.S. trading partners on metals products, will remain exempt, face tariffs or face product quotas limiting the amount of exports to the U.S.
Ferriola said he wants action on those countries’ status.
“At the end of the day if our words are to have meaning we have to act on those,” he said. “We have to follow through on the promises we made to our industry and to our country and we’re counting on the president to do that.”
Commercial Metals Company Executive Vice President and COO Tracy Porter called the continued diminishing of the U.S. manufacturing sector “a travesty.”
“At the pace we’re going we are going to be relegated to some third world country status, probably in my children’s lifetime, if we do not stop it now,” he said. “Unfair is unfair.”
The Ohio Valley has long been a major center for iron, steel, and aluminum production. Despite sharp reductions in recent decades there are still more than 200 steel, aluminum and iron facilities in Kentucky alone.
Credit Alexandra Kanik / Ohio Valley ReSource
/
Ohio Valley ReSource
However, economists warn that tariffs can create problems for domestic industries as well. Affected trading partners have threatened to retaliate against U.S. goods, and the tariffs would raise prices for U.S. businesses and consumers that use steel and aluminum.
According to a report by the Tax Foundation the estimated negative effect on Kentucky, Ohio and West Virginia businesses could be more than $600,000 each year.
