Few of us will be able to pick up a newspaper, check out the news online, or turn on the TV/radio without hearing about a possible trade war in-the-making, but at what cost for the gases industry around the world?

The tariffs have been mooted for some time now, with the prospect of such protectionism from the Trump Administration was a central topic throughout much of 2017. Indeed, the issue was touched about in an interview I ran with the US Steel Manufacturers Association (SMA) in March last year.

President Trump first formally announced plans for the tariffs in March (2018), but subsequently granted some exemptions while countries negotiated. With the verdict this week that not enough progress had been made to warrant a further reprieve, the new tariffs – 25% on steel and 10% on aluminium – have effectively come into force in the last 24 hours.

These apply to the kind of raw materials used extensively across the US manufacturing, construction and oil sectors – essentially plated steel, steel slabs and coil, rolls of aluminium and tubes.

So what impact of these tariffs could we see within the gases industry?


Perhaps unsurprisingly, news of such tariffs has been previously welcomed by the SMA.

The problems facing the global steel business are well documented. Compromised capacity utilisation, the influx of cheap imports, and a serious erosion of profitability have forced the closure of several high-profile steel plants in the last half-decade.

The chief factor still at play is over-capacity, limiting the ability of even the most efficient producers to operate profitable, sustainable businesses – and North America is one of the major regional markets confronted with this trend. Its steel industry has been the subject of relative demise for several decades now, with the US now the world’s largest importer of the product – embodying the issues facing the market globally.

“SMA members continue to confront the challenges associated with unfairly traded steel imports. This has been an issue in virtually every product line and from a wide range of nations. Unfair steel trade continues to have a negative impact on domestic steelmakers, their employees, investors, and surrounding communities,” explained then Vice-President of Policy & Communications, Adam Parr, in an interview with gasworld.

“I remain optimistic about the prospects for the industry, and for the electric-arc furnace sector in particular,” he continued. “It is encouraging to see the Trump Administration’s focus on steel priority issues. I am hopeful that President Trump will work with Congress to advance a pro-manufacturing agenda.”

Tackling over-capacity: An interview with the SMA

When talk of tariffs solidified in March, the SMA issued a statement welcoming the news.

“The Steel Manufacturers Association welcomes President Trump’s proclamation instituting tariffs of 25% on steel imports, effective in 15 days,” it said. “US steel producers have supported broad and effective action under section 232 of the Trade Expansion Act of 1962, designed to remove the threat that these imports are having on the U.S. national security.”

Philip K. Bell, President of SMA, said in the statement, “We are optimistic that these tariffs will adjust imports to provide a level playing field and ensure that the steel industry in our country is able to serve our national security needs. We look forward to the measures being in effect for a period of sufficient duration for companies to reinvest in the steel industry.”

“We also support limited exceptions for key allies, including Mexico and Canada, well-regulated exclusions for products not available from US producers, and mechanisms to avoid transshipment and circumvention of the tariffs. Effective measures will allow the domestic industry to preserve and strengthen our national defense industrial base.”

Zinc coated metal

Local gas demand

Tariffs might also come as welcome news in the local gases business.

gasworld Business Intelligence reflected on the proposition of such protectionist measures in its analysis of the US gases business last year. The Great Lakes region, home to the third-largest industrial gas market of the eight US regions, has a significant metallurgy market and large volumes of both nitrogen and oxygen are produced on a supply scheme basis, much of which is for the substantial steel industry chiefly located on the shores of Lake Michigan and Lake Erie.

Such is its prominence in the region, the growth prospects of the Great Lakes gases business are thought likely to hinge on the future of the metallurgical sector; the imposition of tariffs would ensure that domestic steel is lower-priced than imported steel products and, therefore, benefit the region’s still mills. This, in turn, would benefit the industrial gas companies that supply these mills.

Likewise, gasworld has noted that any efforts to stimulate domestic production by the federal government would be beneficial to the US South East region, given its expansive industrial basins. It is thought likely that we will see an increased and sustained amount of new project activity in the South East over the coming years.

US market report 2017

Questions have been raised, however, with regards to the sustainability of any tariffs imposed. Imposing tariffs on imported steel may provide a short-term boost locally, but would likely result in increased prices for steel products in the longer term, which would impact the nation’s manufacturing sector – particularly the automotive industry – and thereby (potentially) hamper industrial gas demand in other areas.

This is just the local position. On an international level, we can now expect uncertainty – if not hesitancy – to spread to various regions around the world.

Long-term questions

Europe, Canada and Mexico are reportedly planning retaliatory moves of their own in the face of President Trump’s tariffs, with suggestions of tariffs of their own across various goods, industrial and agricultural in nature.

All three have sizeable steel businesses, particularly Europe, and any trade wars on steel product could have consequences for steel mills and in turn gas demand in these regions.

mexico gases market by end user 2016

Mexico Industrial Gases Market by End-User (2016)

Source: gasworld Business Intelligence

This is without even mentioning China, home to a burgeoning steel industry (China produced nearly as much steel as the rest of the world combined in 2017, according to worldsteel) and a blossoming industrial gases business to match. China is often cited as the chief cause behind global steel industry woes, having flooded the market with cheap product in its rise to status as the world’s leading producer. But from a gases point of view, one cannot overlook how much local gas demand this may have generated.

As just one example, a gathering of the country’s Gas Separation Plants Association in April delivered the news that in 2017, the whole industry signed contracts for more than 30 sets of ASUs with a capacity of more than 70,000 Nm3/h – in terms of oxygen generation capacity of these new plants, 25% had gone to the metallurgy sector.

China gas separations plants on upward curve 

There will also be concern in Brazil, an already challenged economy and the largest of the commercial industrial gas markets in South America. The largest end-use sector of industrial gas in Brazil is the metallurgical industry, which accounted for $503m in sales in 2016 – or just over 33% of revenues. The general manufacturing sector generated a further 14% of commercial revenues, with the healthcare, chemicals and food & beverage all commanding shares of revenue in the region of 11%-13%. Any impact on the country’s steel business as a result of tariffs will clearly have a big consequence on its gases business too.

brazil gases market by end user 2016

Brazil Industrial Gases Market by End-User (2016)

Source: gasworld Business Intelligence


It’s also worth considering the less obvious or direct concerns of trade impositions, some of which gasworld has already seen expressed or hinted at in interviews with industry figures.

As Chairman and CEO of Taylor-Wharton and now CEO of TOMCO2 Systems too, Eric Rottier is well positioned across various markets and geographies. The challenges presented by the tariffs was not lost on him in his recent interview with gasworld US, during which he said, “We will continue to operate with minimal corporate overhead… One major challenge we are facing is rising steel costs as a result of the recent tariffs the Trump administration put in place. Unfortunately, we will need to pass these prices on to our customers.”

Pricing concerns were echoed in the first quarter 2018 Baird Industrial Gas Survey, undertaken in partnership with gasworld. The survey provides a snapshot of current quarter trends in the US gases business and one of the key takeaways to emerge was the fact that ‘Supplier pricing is very uncertain due to the tariffs’.

Clearly, the sense of uncertainy is already being felt, and will continue to be felt as US businesses try to navigate around significant changes – including (where applicable) how to adapt their international supply chain networks to deal with higher-priced imports. It is a global village we live in today, after all.

This was a point made over a year ago by Linde Engineering North America (LENA) President and CEO Jason Cooper, in an April 2017 interview with gasworld. Asked how he saw the Trump Administration’s policies impacting LENA’s business, he responded, “This is a tricky question. I believe that the President’s policies will have an impact for sure. It would be easy to say a protectionist policy would be good for business. The reality is that this will be short lived. We live in a global economy today, and I think the knock-on effects of excessive tariffs on imported goods will hurt growth and consumption in the long-term. That would not be good for our business.”

“We are watching closely and will be ready to adjust as necessary to meet the business and customer needs.”

For the next few weeks and months, industrial gas and engineering businesses around the world will be watching closely. Whether they can adjust as necessary – or will need to – is another question.