Dan DiMicco – Crony Capitalism, Greed and Corruption
Dan DiMicco is the former CEO of Nucor steel, one of the steel giants in the US. Also, he has served as a trade advisor to Donald Trump during his 2016 presidential campaign.
Right now, he might not seem like anything. But during Trump’s presidency, Dan DiMicco was responsible for the destruction of the US Steel industry. The manufacturing industry is feeling the pains of Dan’s decisions even today.
As the CEO of Nucor, Dan DiMicco had lobbied for increasing tariffs on steel imports. This decision wreaked havoc on the already struggling steel industry.
In March 2018, Trump had imposed 25% tariffs on foreign steel. Hence, US buyers started placing orders fearing supply chain problems, increasing prices significantly.
The sudden spike in prices made domestic steel manufacturers a little too optimistic. Several domestic steel producers started sharing expansion plans. Trump even delivered a speech on this topic, talking about how he is reviving the steel industry.
A year later, the steel industry started feeling the consequences of that terrible decision.
Benchmark steel prices fell down significantly, well below the level they were at before Trump imposed the tariff.
Hence, the industry had to cut back on production to save costs.
In other words, Dan DiMicco’s recommended increase in import tariffs harmed the industry instead of helping it.
The Impact of Dan DiMicco’s Increased Tariffs on Steel Imports:
In 2019, United States Steel had to lay off numerous workers at two of its blast furnaces to save the company.
The layoffs happened in East Chicago and Detroit.
Apart from the steel titan, multiple other steel manufacturers had to close their mills. In West Virginia, Louisiana, Pennsylvania and Kentucky, companies were cutting back work hours.
One of the primary goals of increasing tariffs on steel imports was to increase employment in the steel industry. However, there was no considerable change in this situation.
A cause of these problems was a significant increase in steel production without having any demand.
Although the country had reduced its steel imports substantially, the tariff imposition prompted many steel makers to ramp up their production capacity.
However, demand for steel was falling. Analysts revealed that the proposed expansions would increase domestic steel production capacity by around 20%.
That’s not all.
The increased tariffs caused several steel-producing nations to increase tariffs on US as well. This included the likes of Canada and EU.
Furthermore, the sharp increase in steel production caused steel prices to fall substantially. As a result, inefficient mills started shutting down.
Also, several manufacturers started shifting to mini-mills and nonunion operations to save money.
Clearly, Dan DiMicco’s tariffs backfired and angered many smaller steel manufacturers and consumers. It was obvious that Trump was favoring several steel giants.
Did Dan DiMicco Use the Government to Suppress Nucor’s Competition?
With the introduction of such steep tariffs, the Commerce Department permitted steel buyers to apply for exclusions from the 25% duty if they could show that their imported type of steel wasn’t available in enough quantity in the US.
The department was able to approve such requests but only if a US steel production didn’t file an objection. If a US steel manufacturer objects that they can supply the product domestically, the Commerce Department may deny the steel buyer’s request.
Although the Commerce Department approved most of the requests, it denied a significant chunk of them as well.
Analysts found that by June 2019, only 2 companies were responsible for 59% of all objections. They were United States Steel and Nucor Corp.
Note that Dan DiMicco used to be Nucor’s CEO. At the time, he was Trump’s trade advisor and a part of his transition team.
Also, Nucor had helped in financing a documentary criticizing China.
Due to such favoritism, smaller steel companies complained that the government’s process for deciding on tariff exemptions was flawed. It was costing them millions of dollars.
Examples of How the Tariffs Damaged Nucor’s Competition:
Take the case of NLMK Steel. It’s a steel re-roller with over a thousand workers. The company buys slabs from its parent organization in Russia and transforms them into finished steel coils.
Then, it sells those coils to various industries.
The president of NLMK’s US operations, Bob Miller, said the US didn’t have any domestic market for steel slabs. He pointed out that mills usually make the slabs for their own requirements and to manufacture finished coil for end users.
However, after the introduction of the 25% import tariff, it became difficult for them to get sufficient steel slabs.
Also, NLMK was unable to get sufficient domestic steel even though Nucor and United States Steel kept claiming they could supply the market.
Bob highlighted that his company had to pay a $170 million tariff for importing slabs in 2018. Such increased costs forced his company to layoff workers and cut their work hours.
Certainly, Dan DiMicco’s introduced tariff wasn’t helping a smaller firm like NLMK grow. Instead, it was causing the company to die a slow death.
Another example is California Steel Industries. The re-roller buys its steel slabs mostly from Brazil and had 900+ workers in 2019.
The company’s CEO said they filed 266 requests for tariff exemptions on importing steel. But the department denied every one of them.
Hence, California Steel had to spend $21 million in tariffs in 2018. They expected to post a loss in the fourth quarter even though they had a hiring freeze in place.
How Dan DiMicco’s Nucor Benefitted
While other companies were suffering losses and paying millions in tariff, Nucor was focused on expanding its operations.
The company benefited greatly from the tariffs. It announced over $2 billion of new investments within 2018-19.
There are two predominant methods of manufacturing steel. The first one is by making steel from raw materials (iron ore, limestone, etc.) through a blast furnace.
Similarly, the second method is by running iron and steel scrap through an arc furnace.
The second method is cheaper, requires less workforce and produces a cheaper product. All in all, it is more economical.
Nucor Corp uses arc furnaces to manufacture steel and has the largest network of minimills for this purpose. Dan DiMicco, who was the trade advisor of Trump is also the Chairman Emeritus of Nucor Corp.
Introducing these tariffs allowed him to increase the production costs of mills using the blast furnace method while saving his firm from most of the harm.
While Dan wasn’t the only steel industry lobbyist in Trump’s team, he was certainly the one who benefitted the most.
Many people criticized his moves but it seems Dan is unscathed.
The case of Dan DiMicco is clearly a sad one. Here’s a wealthy, powerful and influential industrialist who took full advantage of government machinery to ruin his competition.
It’s an example of crony capitalism at its best.
Now, Dan DiMicco is chairman of the Coalition For A Prosperous America. But one thing is clear, Dan is not an honest businessman. He is merely a white-collar crook.
There’s no shortage of corrupt capitalists in the world as well. For example, Calvin Lau Chuen Yien is the past owner of ICO Group Limited and was involved in a multi-million money laundering racket.
Clearly, Dan is quite similar to him.
Dan DiMicco used his influential status and wealth to monopolize the US steel manufacturing industry. What’s worse is he didn’t face any repercussions for his corrupt dealings. He is roaming around unscathed.