American steel unlikely to get Keystone boost despite Trump order

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<span class="articleLocation”>When U.S. President Donald Trump signed orders
to revive two controversial energy pipeline projects this week,
he pledged to require new pipelines to use American-made steel,
a gesture to workers in the hard-hit industry who helped propel
him to power.

But U.S. steelmakers will receive negligible benefit from
the multi-billion dollar Keystone XL project, one of the two
projects Trump ordered to proceed, because they have limited
ability to meet the stringent materials requirements for the
TransCanada line.

Economists said Trump’s order has many loopholes to
enforcement and could violate international trade law.

Meanwhile, in the quiet prairie town of Gascoyne, North
Dakota, deer wander among gleaming stacks of steel tubing
intended for the Keystone pipeline. The company bought the
material years ago when the U.S. debate was raging over whether
the project should go ahead.

TransCanada tried for more than five years to build the
1,179-mile (1,897 km) pipeline, until then-President Barack
Obama rejected it in 2015.

Since the materials were already purchased for Keystone,
Trump’s move to revive the project should not result in new
large steel orders.

The profits for manufacturing that steel were booked by
companies with corporate headquarters in Russia, India and
Italy. Those companies own the steel mills in the United States
that made about half of the pipeline for the $8 billion project.

Much of that steel has sat exposed to the elements in
several giant stockyards along the pipeline’s route for more
than two years. Analysts said some of it will need to be
replaced.

But that is unlikely to come from U.S. producers, such as
U.S. Steel, AK Steel or Steel Dynamics,
analysts and traders said, because of the specialized steel
required for the big-ticket project.

Trump’s directive on using U.S.-made steel is likely also
inconsistent with long-standing World Trade Organization rules
that require imported products to be given the same treatment as
domestically produced goods.

The directive could well become the target of a challenge
under WTO rules.

Trump’s order also runs counter to the North American Free
Trade Agreement (NAFTA), a pact that he said he wants to
renegotiate but one that nevertheless remains in effect.

‘NICE GESTURE’

TransCanada resubmitted its application Keystone project on
Thursday, two days after Trump signed the orders.

The line is designed to link existing pipeline networks in
Canada and the United States to bring crude from Alberta and
North Dakota to refineries in Illinois en route to the Gulf of
Mexico.

Around Gascoyne where the tubing has sat idle in a
TransCanada yard, there is little sign among residents of the
fierce opposition that stopped Keystone and led to the delay of
the other controversial pipeline that Trump pushed forward on
Tuesday – the Dakota Access Pipeline.

But townspeople were skeptical of Trump’s made-in-America
order.

“It’s a nice gesture, but you can’t renegotiate when the
pipe’s been bought already,” said Dan Peterson, 47, a contractor
from nearby Bowman, North Dakota, who supports the project.

About half of the pipe was forged in Arkansas, at a plant
owned by India’s Welspun. About a quarter came from a
Russian-owned plant in the Canadian province of Saskatchewan,
and the rest came from Italy and India.

Alberta-based TransCanada expects to use roughly 821,000
tons of pipe in Canada and 660,000 tons in the United States for
the project. TransCanada representatives did not return a
request for comment.

Trump’s order pertains only to sections of pipelines built
in the United States, and it said the directive should be
followed to the “maximum extent” possible, which gives the
administration wiggle room.

Steel manufacturers and analysts said that TransCanada’s
stringent requirements for the pipeline, including thickness and
pressure requirements, already keeps most U.S.-based steelmakers
out, given current forging and manufacturing processes.

That includes Nucor and Steel Dynamics, which can
make pipeline that is thick enough but may not meet all the
pressure parameters. For the main trunk line, experts say that
Keystone requires welded line pipe between 36 inches to 42
inches (91 to 107 cm) in diameter.

Foreign-owned steelmakers with U.S. operations, such as
India’s Welspun and JSW as well as Russia’s Evraz, are best able
to produce the pipe.

To be sure, U.S. steelmakers have a large part of their
business in producing pipe and tube for the oil and gas
industry. But, analysts said that to meet Keystone’s
requirements, they will need to reinvest and retrofit their
plants to reorient production. It’s not clear if other pipeline
projects would have the same standards as Keystone.

“There are people who make (this type of) steel pipe in the
U.S., but they’re mostly Indian and Russian” companies, said
Charles Bradford, an analyst at New York-based Bradford
Research.

(Additional reporting by Terray Sylvester in Gascoyne, North
Dakota)



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