Published in Manufacturing

Steelcase asks for relief from metal tariffs

BY Saturday, May 26, 2018 02:11pm

GRAND RAPIDS — Facing the possibility of higher metal costs, the largest manufacturer in the office furniture industry has reached out to the federal government for relief.

Steelcase Inc. (NYSE: SCS) earlier this year applied for a tariff waiver for a specialized porcelain- enameled steel it sources from Japan for whiteboards made by its Georgia-based PolyVision division.

The special steel used to make whiteboards is not available from domestic sources and therefore is subject to President Trump’s recently announced tariffs on imported steel and aluminum. Steelcase previously received a tariff waiver from the U.S. Department of Commerce in March 2017 for the material, according to a spokesperson.

“The company has filed for a similar exclusion based on the most recent tariffs announced by the White House,” Katie Woodruff, global audience communications manager for Steelcase, wrote in an email to MiBiz. “Both Steelcase and PolyVision strongly support measures to ensure a fair and level playing field and are working with other companies and government officials to reach that goal.”

In a March conference call to discuss quarterly financial results, Steelcase executives said the proposed tariffs on imported metals — including the special Japanese steel — could add $10 million in incremental annual raw material costs for the company.

That additional cost on top of the $100 million Steelcase already spends on raw materials is “a relatively big deal,” said CFO David Sylvester, who noted the magnitude of the tariffs will be “difficult to estimate.”

“It’s embedded in so many different purchased parts,” he said of the cost of metal.

Sylvester added that the company has in the past imposed surcharges and adjusted product prices more than once a year, but those adjustments typically take a couple of quarters to take effect.

“We know with our customers that the best time to talk about the price adjustment is when you have inflation, and we have inflation right now,” he said. “We know that we can’t absorb this level of inflation, so we are obviously paying close attention to it.”

Other manufacturers also are dealing with the possibility of increased steel prices.

Since President Donald Trump proposed a 25-percent tariff on imported steel and a 10-percent tariff on imported aluminum, the U.S. Bureau of Industry and Security, a part of the Commerce Department, has received 10,444 steel and 1,624 aluminum waiver applications, according to statistics provided to MiBiz.

Of the waiver applications, 7,665 were for processed steel and 440 were for processed aluminum waivers. (The Bureau does not break down waivers on a state-by-state basis.)

Grand Valley State University economist Brian Long expects the waiver applications to continue as companies try to mitigate the effects of the tariffs.

“More than anything, it’s squeezing the profitability of companies,” said Long of the tariffs.

“There will be a long time before the consumer market spills over. I have a concern for this if it blows up, but there seems to be optimism of some sort. We are going to try and find better agreements, and the president is trying to find better agreements, but he had to get their attention first. You have to shake them up enough so they get serious about negotiation.”

Despite some rumblings that the U.S. and China are backing off from a potential trade war, Treasury Secretary Steven Mnuchin said the steel and aluminum tariffs are unaffected and will remain in place, according to reports.

To Steelcase President Jim Keane, the tariffs come as an “unfortunate” development for U.S. manufacturers.

“It is unfortunate that this tariff intended to protect jobs in one important sector has the effect of reducing the competitiveness of those of us with the strong commitment to U.S. manufacturing (while) potentially improving the competitive advantage of low-cost importers,” Keane told brokerage analysts in March. “We are hopeful a more thoughtful response will evolve as we take actions necessary to adapt to the higher commodity costs.”

While Keane acknowledged the collective optimism in the business community based on factors like federal tax reform, he cautioned that the tariffs and other threats to trade had started to “temper” his outlook.

“[T]here is concern that things like the tariffs and threats of other kinds of trade actions and the territorial efforts that could take place could take some of the wind out of the sails,” Keane said.

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