How will tariffs affect toolmakers? It's complicated

With NPE2018 looming May 7-11, mold makers are bracing for higher costs from President Donald Trump's tariffs on steel and aluminum imports, and waiting for a decision on whether tariffs will extend to key high-end steel countries of Germany and France.

The tariffs — 25 percent for steel and 10 percent for aluminum — will result in higher prices for molds, industry officials said.

How much higher depends on the type of mold and the type of steel used. But the tariffs, announced by Trump March 8 to meet a campaign promise to help save jobs at U.S. steel mills, will result in higher prices for steel, economists say.

The Washington-based Plastics Industry Association quickly opposed the tariffs, saying they could be "devastating" to the industry by increasing costs for mold builders and machinery companies. The trade group, which sponsors NPE, says the tariffs could cost plastics industry jobs and blunt the economic boost it sees coming from the Trump administration's tax cut package.

The American Chemistry Council also opposes the tariffs, saying the higher costs for steel and aluminum could negatively impact some of the planned investments in new U.S. chemical plants.

Steel prices have not gone up yet, mold makers said in late April, but some of them have seen higher prices for aluminum. Toolmakers are keeping close contact with steel suppliers, and some are putting special language in job quotes.

After announcing the tariffs, the Trump administration exempted several countries, including Canada, Mexico and South Korea. Trump also gave an extension for European Union countries, holding off a decision on whether to impose tariffs on key U.S. allies, and important mold steel producers such as Germany and France, until May 1, the Tuesday before NPE2018.

How much do steel prices impact tooling? Sources quoted a wide range of estimates. Some said steel accounts for about 20-30 percent of a mold price. But some cited numbers as high as 50 percent, or as low as just a few percentage points of the total cost.

MSI Mold Builders Inc. uses steel and aluminum to make large molds for injection, structural foam, reaction injection molding, blow molding and other processes.

MSI President Roger Klouda said news coverage of the tariffs have prompted lots of questions from customers. Klouda tells them vendors are saying they are well-stocked with material. But he doesn't have a crystal ball.

"Just about every day, they call and ask: 'What's going to happen? What's going to happen with prices?'" he said. "We have a line item in our quotes that says pricing information is based on tariffs."

Markets for MSI's molds include parts for all-terrain vehicles, tractors, heavy trucks and pallets. Klouda said steel accounts for about 25 percent of the cost of making a mold at his company — 20 percent for the mold and another 5 percent for the leader pins.

Cedar Rapids, Iowa-based MSI competes directly with mold shops clustered around Windsor, Ontario, which already have a currency advantage, said Toby Bral, MSI's sales manager.

"It's very competitive," Bral said. "It's already a really tight market. And then if our material costs go up 25 percent ... it makes us far less competitive in an already competitive market."

Bral is president of the American Mold Builders Association, but he said his comments are made in his position at MSI, not on behalf of the trade association.

Canada, a supplier of some mold steels, is exempt from the tariffs, but the levy will result in all steel makers raising prices — including in the United States, Bral said.

"The costs will go up across the board," he said, adding that tariffs "will hit the U.S. mold maker harder than the others."

In an April 24 interview, Klouda said MSI Mold Builders just received a notice that aluminum prices are going up about 10 percent. Steel had not gone up yet, he said.

But MSI officials are watching the EU extension closely. That's because the mold maker sources its P20 steel, in large, thick-cut sizes for its big molds, from Europe, Bral said.

Evco Plastics Inc., a custom molder based in DeForest, Wis., builds its own molds. Interviewed at the Plastics News Executive Forum just as the tariffs were coming out, President Dale Evans said the levy would add some cost. But he said there are other important factors.

"The demand of the automotive industry of building molds and taking capacity out of the industry is having a bigger impact," he said.

Mike Zacharias, president of Extreme Tool & Engineering Inc. in Wakefield, Mich., said steel content accounts for less than 2 percent of the cost to make his small precision molds, which run on injection molding machines with less than 500 tons of clamping force.

Zacharias said a large customer asked about the tariffs, and he explained higher steel prices are not a problem for Extreme Tool, on a percentage basis. "It's another challenge in business, but no bigger or greater than any of the other ones we deal with every single day," he said.

Even so, Zacharias said higher steel and aluminum prices are a major issue for the tooling sector.

"Costs for the largest mold bases may go up in cost, and so I look at it that it's not that big of a deal. But I also have friends that in the industry where it's 50 percent of cost," he said.

Several mold making officials said it's unclear if the tariffs on steel and aluminum cover raw steel stock, or if they also include finished goods like completed molds. Either way, when it comes to China — a major source of molds that compete with U.S. mold makers, the Trump administration says it will slap 25 percent tariffs on China that cover a wide range of industrial goods, including molds and mold components.

Tariff discussions dominate the halls at Chinaplas.