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Factchecking Trump: 'Directive' to buy American steel for pipelines - not quite

London (Platts)--2 Mar 2017 930 am EST/1430 GMT


President Donald Trump told Congress and America Tuesday night that new pipelines built in the US would be made with American steel.

"We have cleared the way for the construction of the Keystone and Dakota Access pipelines -- thereby creating tens of thousands of jobs -- and I've issued a new directive that new American pipelines be made with American steel," Trump said.

Related video: US steelmakers appear poised to benefit from Trump's policies, but opposition exists

Not so fast.

What Trump did, more accurately, was to issue a presidential memorandum on January 24 directing the secretary of commerce to investigate the matter of buying US-produced materials and to develop a plan.

US Shipments of Steel Pipe

"The Secretary of Commerce, in consultation with all relevant executive departments and agencies, shall develop a plan under which all new pipelines, as well as retrofitted, repaired, or expanded pipelines, inside the borders of the United States, including portions of pipelines, use materials and equipment produced in the United States, to the maximum extent possible and to the extent permitted by law," Trump said in the document. "The Secretary shall submit the plan to the President within 180 days of the date of this memorandum."

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Although not the directive the president implied Tuesday evening, its spirit is still in keeping with his support to buy American whenever possible for such new projects. But such a procurement mandate is still being evaluated and planned. It is not under way -- and according to the memorandum, might not be for six months.

One legal hurdle might be with the World Trade Organization. Unless for a federally funded project, private companies cannot be forced by the US government to abide by Buy American provisions, according to WTO rules.

S&P Global Platts recently heard from a Washington-based agency that has been asked by Commerce to provide information related to this memorandum.

And now heading Commerce is Wilbur Ross -- who was confirmed as secretary on Tuesday and sworn in Wednesday. Ross resigned from the board of directors of ArcelorMittal, the world's largest steel producer, Wednesday morning.


KEYSTONE/DAKOTA: NOT NEW, LITTLE IMPACT


Linking the Keystone and Dakota pipelines to buying American steel was also playing somewhat loose with facts -- although the President did specify the priority to purchase American steel was for "new" pipelines.

Reuters reported in late January that much of material for the 1,179-mile Keystone pipeline had already been ordered by TransCanada, which had tried since 2012 to build it -- before Trump cleared the way.

Alex Pourbaix, TransCanada's president for its Energy and Oil Pipelines segment in 2012, said in February of that year that "75% of the pipe used to build Keystone XL in the US would come from North American mills, including half made by US workers in Arkansas." Pourbaix is now TransCanada's chief operating officer.

"In addition, we have already sourced goods for the pipeline valued at approximately $800 million from US manufacturers," Pourbaix said in a statement at the time.

Pourbaix then estimated that 821,000 short tons of high-strength line pipe would be used on the project in Canada and the US. TransCanada said it would use 660,000 st of steel for the US portion of Keystone, and even specified the line pipe mills that would manufacture the pipe: Welspun in Little Rock, Arkansas - 332,800 st; Evraz in Regina, Saskatchewan - 156,266 st; ILVA in Italy - 103,147 st; and Welspun of India - 69,457 st.

Pipeline companies like TransCanada do not buy steel directly from steel mills. Steel mills make plate or hot-rolled coil that is then sold to pipe manufacturers who fabricate pipe and other products from the mill-sourced steel.

One reason cited by sources why TransCanada initially bought pipe from companies with offshore roots (Evraz's parent is based in Russia; in addition to ILVA of Italy and Welspun of India) is because TransCanada has stringent requirements for the pipe, especially pressure requirements, which tend to keep out some US-based producers, given their forging and manufacturing processes.

What is certain is that a lot of tons are at stake. For example, a new pipeline about 600 miles long requiring pipe with a 36-inch outside diameter and a 0.365-inch wall thickness, would mean more than 200,000 st of steel.

--Joe Innace, joseph.innace@spglobal.com
--Edited by Richard Rubin, richard.rubin@spglobal.com

Related video: US steelmakers appear poised to benefit from Trump's policies, but opposition exists

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