13 sep 2018
An estimated 80% of products and services provided to large organisations in natural resources, infrastructure and industrial sectors could feel the ill effects of the steel and aluminium tariff charges introduced in America, potentially forcing many companies out of business, a new report – out tomorrow – highlights.
The paper, ‘Between the hammer and anvil: tracking the disruptive effects of US steel tariffs’, by supply chain management experts Achilles Information, suggests that continued escalation of the ongoing trade war could force producers of manufactured goods out of business and threaten supply of metal in multiple regions.
The report looks at various sections of Achilles’ international network – pulling in data from 800 buyers and 65,000 suppliers across industrial, infrastructure and natural resources sectors – and assesses how much they could be affected by the metal tariff charges –25% tariff on imports of steel, and a 10% tariff on aluminium.
When specifically looking at a cross-industry sample of over 2,700 suppliers, 340 of which supply valves, the research also demonstrates:
• Prices of some fabricated metals, like valves, would have to rise by 10% to offset the impact of the tariffs.
• 75% of suppliers currently report a profit margin less than 10%, meaning the impact of tariffs could push their margins into the red.
• The introduction of these tariffs could create huge problems in the supply chains of the automotive, manufacturing and building industries. Unless prices of fabricated metal products, like valves, are increased, in some cases by over 10%*, profit margins could slip into the red and force many suppliers out of business. This will severely impact the supply chains of many large buying organisations, and ultimately the end consumer, who will potentially see increased costs and decreased availability of fabricated metal products.
Katie Tamblin, Head of Product and Pricing at Achilles commented:
“Tariffs will impact purchasing, particularly across heavy industry. There will be increasing prices on metal in the US. Metal flows through global supply chains, and suppliers of fabricated metal produced in the US will really struggle to remain competitive. For buyers of finished goods, the impacts of these can remain buried in the supply chain for months, before rearing their ugly heads as longer lead times. disruptions in supply, and sudden, large cost increases.
“As a result, we expect to see significant job losses across the metals fabrication sector in the US. Already, Mid-Continent Nail Corp, has made 12% of their workforce redundant and directly attribute this to difficult trading conditions related to the introduction of these tariffs. Volvo is moving sourcing for the XC60 out of China to avoid extra costs.”
The report recommends that large Buying organisations:
• Have a detailed understanding of where there are metal/steel products within the supply chain.
• Prepare for relocation of production.
• Regularly assess the supply chain – and the suppliers of the suppliers to secure advance warnings of where suppliers may start to struggle to fulfil orders.
The full report, ‘Between the hammer and anvil: tracking the disruptive effects of US steel tariffs’, will be available online from Thursday 13 September.