Tariffs imposed on lubricants and lubricant additives traded between the United States and China have made an obvious impact on the markets in both countries, but the U.S. industry has also been affected by levies that Washington, D.C. imposed on steel imports.
For some products the impact was significant, though industry sources said recently that it has leveled off in recent months.
The taxes added to lubes and lube additives were part of the ongoing U.S.-China trade duel, American steel tariffs were a protectionist measure lodged last year against most of the worlds steel-producing nations. On March 23 Donald Trump’s administration imposed a 25 percent tariff on steel imports from all countries except Argentina, Australia, Brazil and South Korea.
Those levies have added to the cost of steel drums used to transport some lubricants, according to an industry consultant. It has been estimated that this would add about 5 cents per gallon to lubricants packaged in drums. “We are beginning to hear that some European customers that purchase from the U.S. are now considering alternative sources,” said Suzan Jagger, president of consultancy Jagger Advisory LLC.
Customers seeking alternatives to escape the cost increases of tariffs is not a new phenomenon for the packaging industry, especially because the price of steel has a history of fluctuating. “Every now and then when the cost of steel drums go up, usually because of steel [prices] increasing, you hear rumors that people will be moving,” said Ed West, senior vice president of General Steel Drum LLC.
According to West’s estimates, with the tariffs being imposed, “the price of domestic and foreign [steel drum] sales [went] up 12 cents to 15 cents per pound,” he told Lube Report. The tariffs also hiked up costs for smaller parts of lubricant packages that use steel, like the steel ring on an open head drum, noted West.
Some companies, like Rigid Industrial Packaging & Services, attempted to mitigate price increases for their customers by offering alternative materials. Steel prices increased, and eventually steel drum and container prices did also. “We offered alternative packaging types, and some customers were able to change to those and mitigate some of the cost increases,” said Tom Miller, the company’s director of global key accounts in Latin America and Mexico.
Still, many customers chose to continue using steel containers. “We have heard similar mentions of alternative sources, but our customer demand as an industry has not seen any [lasting] impact,” said Kyle Stavig, CEO of General Steel Drum.
Miller echoed this sentiment saying, “Since reaching the peak price in May, steel prices have decreased over the past months, and we have not seen any decrease in demand.”
As time goes on, the cost of steel is evening out, lending some stability to the market. “The cost impact at the height of the tariff impacts may be true, but we are seeing a leveling [off] of pricing now that the marketplace has found the point where imported steel can find the U.S. market,” said Stavig. “In the early days of the tariffs, there was a bit of panic that created a rush for steel consumers to stockpile steel at any cost. The market has now found its equilibrium, and we do not see supply issues. As a result we are seeing a leveling of steel prices.”