The Buy American Act Increases Domestic Steel Requirements
On March 7, 2022, the White House made final changes to the Buy American Act, which increases the current domestic steel requirement for federal projects. While this may sound like great news for the American economy, some drawbacks may occur—at least until supply can catch up with the demand.
The new rule from the Federal Acquisition Regulatory Council increases the requirements from 55% to 75%, but it will happen in steps between the years of 2023 and 2029. The first step will go into effect on October 25th, with the new rock bottom number of 60% American-made content.
These increases are meant to drive more business to American steel manufacturers and, in theory, bolster the US economy and secure manufacturing jobs. So, where are the potential drawbacks?
The first, of course, is the strain to supply chain that has increased again due to the conflict in Ukraine. Without any chance to get caught up on projects that languished during the pandemic due to long wait times, builders and fabricators again face weeks and even months of wait times for steel. This has already elevated the pressure on American steel mills to produce more product, and the increase in material requirements from the Buy American Act will only exacerbate the issue.
Next, as expected, is an increase in price, which will directly affect builders and fabricators as they work to meet budgets. With high demand and low supply, prices naturally increase, and we’re facing new historic highs on US steel prices in the very near future. Due to the Buy American Act, fabricators will be forced to pay the higher prices in order to meet the new thresholds.
Some exceptions may be available, though they will be few and far between. For the most part, builders and fabricators will need to find additional domestic suppliers in order to meet the increasing thresholds. One loophole could bring relief for some, though again, very rarely: If the American steel content threshold can be met but the product cost is deemed unreasonable, those government buyers can seek to revert to the lower 55% threshold, at least until the year 2030.
How does this affect surplus steel sales? At the moment, it doesn’t, unless we’re selling to federal project buyers. Much of the inventory at Texas Iron and Metal is domestic, however, so we’re prepared to meet demand whenever we can. In the future, however, those thresholds could continue to put a strain on the public sector as fabricators and builders source steel. When that happens, we’re proud to provide more affordable options.