US steel industry gets a boost from legislative support

The industry was supported by the CHIPS Act and the infrastructure and inflation reduction laws

The US law aimed at stimulating computer semiconductor producers (CHIPS and Science Act) provides support to steel producers supplying materials to the construction industry, S&P Global reports.

The impact of this law on the domestic steel industry is expected to be relatively short-lived. However, steelmakers see long-term prospects thanks to two other laws passed under the Biden administration – the Infrastructure and Inflation Reduction Act (IRA) – that will promote further industrial construction, as well as increase production of electric vehicles and other specialty goods, expanding the benefits for the steel industry.

However, steel and other construction materials, according to Scott Paul, president of the Alliance for American Manufacturing business group, are benefiting from CHIPS right now, as these products are in demand in all locations where chip manufacturing facilities are being built.

In particular, as Daniel Needham, Nucor’s commercial executive vice president, noted in January this year, the company is actively supplying metal products to several CHIPS fabs currently under construction.

«Despite some headwinds, we see this activity peaking in volume and demand over the next few years,» he explained.

Thanks to demand from the construction sector and the relatively high cost of scrap, rebar prices in the US continue to remain above historical levels. In 2024, they will be under less pressure than prices in the hot-rolled coil market, S&P Global notes. As of March 1, Platts estimated rebar in the US Midwest at $832.5 per short tonne EXW, up 21% from the average price in 2017-2021.

According to experts, US steelmakers can expect further demand from the semiconductor industry if certain domestic requirements are added to the CHIPS Act funding solutions.

For example, the US Build America Buy America Act (part of the infrastructure law), starting in May 2022, establishes preferences for domestic products in federal support for infrastructure projects.

The CHIPS law did not strictly require that private companies must use American steel, but applicants for funding were asked to answer how they would use locally produced products.

While the construction of semiconductor plants may increase demand for steel in the United States in the short term, the long-term impact is likely to be concentrated in other industries, such as the automotive industry, experts say.

Steelmakers can also be optimistic about additional spending from the IRA and the bipartisan infrastructure bill, which will boost construction and specialty product production.

As GMK Center reported earlier, the American Iron and Steel Institute (AISI) is once again calling on Congress to take steps to update US trade remedy legislation. According to steelmakers, it is not keeping pace with the efforts of China and other countries to circumvent import duties.