In a significant move, Zekelman Industries has filed a lawsuit in the U.S. District Court for the District of Columbia against the Republic of Mexico. This lawsuit accuses Mexico of violating trade agreements and engaging in the dumping of steel into the U.S. market. According to Zekelman, this conduct is detrimental to U.S. national security as it threatens domestic steel producers and has already resulted in the closure of two of their manufacturing facilities, one in Long Beach, California, and another in Chicago, Illinois. These closures have led to over 400 American workers losing their jobs.
Alongside the lawsuit, Zekelman has taken additional steps by submitting petitions to both the U.S. Office of Homeland Security and the Commonwealth Court of Pennsylvania. The company filed a Section 232 Petition urging Secretary Alejandro Mayorkas to enforce existing trade agreements with Mexico. Additionally, a Petition for Determination of Discrimination has been lodged in Pennsylvania, claiming that Mexico is discriminating against steel conduit manufactured in the state, thus violating the Pennsylvania Trade Practices Act (PTPA). This act was designed to protect local steel and aluminum products and prevent foreign discrimination.
The lawsuit comes at a time when steel shipments from Mexico have surged dramatically since 2021, causing significant harm to U.S. steel manufacturers. After a 2019 agreement lifted tariffs on Mexican steel, Mexico agreed to maintain reasonable import levels. However, Zekelman argues that almost immediately, violations began, leading to a 72% increase in steel imports from Mexico in 2022 compared to the historical average from 2015 to 2017. The Mexican government’s substantial ownership stakes in key steel producers have compounded concerns over unfair competition.
Barry Zekelman, Executive Chairman and CEO, emphasized the urgency of the situation, stating, "The American steel industry is being damaged, and American workers are paying a price." He pointed out that Mexican steel is often sold at prices significantly lower than domestic manufacturers due to lower production costs and government subsidies, creating an uneven playing field. This, he argued, poses a direct threat to both the industry and U.S. national security.
In response to these challenges, U.S. Senators Tom Cotton (R-TX) and Sherrod Brown (D-OH) have introduced bipartisan legislation aimed at reinstating a 25% steel tariff until Mexico complies with the 2019 trade agreement. Without such measures, investments in new plants and upgrades at existing facilities are being postponed, raising concerns about the long-term viability of the U.S. steel industry. In 2023, the iron and steel sector supported nearly 1.7 million jobs and contributed approximately $520 billion to the U.S. economy.
Zekelman's filings suggest that the issue extends beyond Mexican steel itself, as there appears to be a significant increase in steel imports into Mexico from countries like China and India. Despite only a 13% rise in domestic demand for steel in Mexico from 2015 to 2023, steel imports into Mexico surged by over 80%. This situation raises alarms about potential circumvention of U.S. tariffs through Mexican ports, effectively allowing subsidized steel from other countries to enter the U.S. market.
While the Biden Administration has implemented a "melt-and-pour" requirement on Mexican steel imports, requiring that any steel not melted and poured in a USMCA country or Brazil faces Section 232 tariffs, Zekelman contends that this strategy may not effectively curb the surge in Mexican imports. The company argues that domestic steel is essential across various sectors, including defense, energy, and food production, and insists that action must be taken to protect American jobs and communities from the repercussions of steel dumping.
Zekelman Industries, comprising various operating companies including Atlas Tube and Wheatland Tube, stands as a critical player in the North American steel market. With a workforce of over 3,200 across 20 manufacturing locations, the company emphasizes its commitment to U.S. manufacturing and is calling for robust governmental action to address the challenges posed by unfair foreign competition.
