DowDuPont Says Trump Steel Tariffs Hurt Case for New U.S. Plants

Updated on
  • U.S. vies with Canada, Argentina for Dow chemical investment
  • Dow used $1.2 billion of steel in newly completed U.S. project

Trump Says U.S. Has Been Mistreated, Will Go Ahead With Tariffs

DowDuPont Inc., the world’s largest chemical company, is considering Canada or Argentina instead of the U.S. Gulf Coast for its next major investment as President Donald Trump’s proposed steel tariffs make domestic construction pricier.

The tariffs would add hundreds of million of dollars to DowDuPont’s next wave of petrochemical expansion, said Jim Fitterling, chief operating officer of the Dow unit.

“You eventually get yourself to the point where you are saying, ‘Should I really be building that here or somewhere else?’” Fitterling said Tuesday on the sidelines of the CERAWeek by IHS Market energy conference in Houston. “We’ve got opportunities in other places like Canada, like Argentina. All of them right now are on the radar screen.”

DowDupont last year completed construction of $6 billion in new factories along the Texas Gulf Coast to take advantage of abundant, low-cost natural gas from the shale drilling boom. Those plants contained about $1.2 billion worth of steel, Fitterling said Tuesday in an interview. Trump’s proposed 25 percent duty on steel imports would have added about $300 million in costs to the project.

Next Wave

The company, which in May announced another $6 billion of U.S. projects, plans to disclose a big investment before the Dow unit is spun off as a separate company in the first quarter of next year, Fitterling said. But the economics of the development are shifting.

Rising U.S. exports of propane and ethane, the gas liquids that Dow converts into chemicals and plastics, already threaten to narrow U.S. profit margins. Steel tariffs would reduce U.S. profitability further, he said.

Nearly half of all U.S. manufacturing investment for the past two years has been for chemical plants, largely because shale gas provides a cost advantage over other areas of the world, he said. That’s helped turn a U.S. trade deficit for chemicals into a surplus, the COO said.

“You don’t want to stop that development from happening,” Fitterling said. “You don’t want policies to get in the way of that. Before we start damping everything, let’s see what’s at risk.”

Shale gas has spurred $185 billion of completed and proposed investments in chemical and plastics factories, with about half of the spending yet to begin, the American Chemistry Council said on Friday. Trump should reconsider the tariffs that will hurt a sector creating jobs, the industry group said.

DowDuPont is relaying its concerns to the Trump administration through cabinet departments and congressional representatives, Fitterling said.

(An earlier version of this story corrected the amount of new investment planned.)
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