When Imported Steel Makes Sense, Despite Tariffs

TORNIO, Finland — You must have a very Great reason to toil in iron-melting heat an hour’s drive south of the Arctic Circle.

nevertheless there is usually an economic logic behind the Finnish steel maker Outokumpu’s huge complex in which tiny city, where reindeer fillets are regular fare. Its centralized production line of high-grade stainless helps to explain how global supply chains work — as well as why President Trump’s trade war could be disruptive.

Outokumpu’s story is usually one of finding comparative advantage as well as efficiencies. as well as which begins hundreds of meters beneath a Lapland forest inside a man-made warren of industry. On a recent day, a miner, Kalle Kilpelanaho, was perched within the cab of a large boring machine deep inside a tunnel, twisting a joystick which could maneuver a drill 20 meters into the rock floor.

“We want the dark brown,” Mr. Kilpelanaho shouted over a mechanical roar, referring to the pulverized rock churned up by the drill. Brown indicates chromium ore, the element which turns ordinary steel into rust-resistant stainless steel. which shines the drums which spin inside American washing machines or beats back rust in cars.

Outokumpu incorporates a bounty of which.

The discovery of copper in eastern Finland a century ago as well as then chromium here within the 1950s — an estimated 100 million tons underground as of 2012 — made Outokumpu an economic engine for Finland.

Generations of families have worked in its factories as well as lived off its chromium deposits as the demand for high-grade stainless has increased globally. The government owns a 26 percent stake. Today, there are 2,300 workers, separated by just a few miles, involved in mining or smelting or trucking miles-long rolls of finished steel to a nearby company-owned seaport within the Gulf of Bothnia.

The steel is usually shipped through the Baltic Sea as well as then across the Atlantic to American manufacturers, who have been among the Finnish company’s eager customers.

nevertheless the economic rationale behind global supply chains has been scrambled by Mr. Trump’s tariffs. By imposing a 25 percent tax on steel imports through the European Union as well as additional allies, Mr. Trump has forced customers of companies like Outokumpu to obey a logic defined by his policies rather than market forces.

The president’s aim is usually to raise the cost of imported steel as well as force companies to buy steel through companies within the United States. There are some complications — as well as contradictions — for buyers. Modern steel is usually a designer product. Depending on what a customer wants, steel makers mix in ingredients like nickel, molybdenum or titanium to create differing degrees of hardness, pliability or resistance to corrosion.

Many kinds of steel, including varieties made in Tornio, are simply not available through suppliers within the United States. as well as no one is usually much interested in generating them in America because the demand is usually too tiny to justify the investment. Outokumpu has mills in tiny cities in Alabama as well as South Carolina as well as Mexico, nevertheless no site produces stainless as efficiently as the Finnish plant can.

Perhaps most important, there are no active chromium mines in North America.

The president’s tariffs on imported steel have created headaches for people like Chris Ulbrich, chief executive of Ulbrich Stainless Steels & Special Metals in North Haven, Conn.

The family firm buys steel through Outokumpu as well as processes which further for use in products like aircraft engines as well as automobile airbags.

One of the varieties of steel which Ulbrich buys through Outokumpu is usually called Type 305 Stainless as well as contains at least 12.4 percent nickel. The recipe is usually tailor-made for a customer whom Mr. Ulbrich, for proprietary as well as competitive reasons, declined to name.

Mr. Ulbrich, the third generation of the family which founded the company, said he had searched for the same product among the handful of American companies which still make stainless steel. He finally found one willing to produce the steel. nevertheless the supplier insisted which Mr. Ulbrich buy many times more of which than he needed.

“We do 0 grades of metal here, they are all different,” Mr. Ulbrich said. “which 305 item incorporates a special chemistry as well as is usually not made within the U.S.”

Mr. Ulbrich said he had little choice nevertheless to pass the tariffs on to his customers. Eventually consumers will wind up paying the tab. “Inflation will start to pick up,” he said.

Why should some kinds of steel come only through northern Finland, where which is usually so cold in winter which the sea freezes as well as icebreakers must clear a path to the harbor? Despite its location, as close to Russia’s arctic port of Murmansk as to Helsinki, Tornio offers a favorable combination of conditions.

Outokumpu’s landscape — the proximity of mines, factory as well as seaport — saves time in production as well as on transport which allows for “an enormous efficiency gain,” said Roeland Baan, the company’s chief executive.

The most important factor is usually the chromium wealth beneath Kemi, a town about 15 miles through Tornio. An amateur geologist discovered the chromium deposit within the 1950s when he noticed a rock embedded with telltale silvery flecks.

At the beginning the ore was dug through an open pit, as well as when the shovels couldn’t go any deeper Outokumpu began tunneling underground. Today a grid of tunnels reaches down 500 meters, or about one-third of a mile.

The mine is usually its own underground world, which has a lecture hall for training sessions as well as a subterranean employee cafeteria, where the main course on a recent day was liver stew.

A cavern blasted through the rock serves as a maintenance garage for a fleet of vehicles, ranging through pickups to haulers which pump concrete reinforcing for tunnel walls. There is usually even a tiny boat used for crossing flooded areas. The brightly lit space is usually big enough which, to mark extraction of the 50 millionth ton of ore in February, Outokumpu had a party there as well as hired a Finnish heavy metal band for entertainment. Cue the jokes about “hard rock.”

An underground road, several miles long as well as wide enough For two main trucks to pass, connects to dozens of side tunnels where the ore is usually dug. within the chill air at the end of one tunnel, a worker wired explosives embedded within the rock face. He was preparing to blast out a section of ore, which would likely then be dug out, crushed as well as hauled up a central shaft to the surface.

which is usually only a short drive through the mines to the huge furnaces in Tornio, where the ore is usually melted with additional ingredients to create ferrochrome, a crucial ingredient in stainless steel.

The ferrochrome, still molten, travels on rails a few hundred meters across the factory complex to be mixed with additional chemicals as well as minerals to make stainless steel. The short distance between mine, smelter as well as steel furnace eliminates the need to reheat the ferrochrome as well as adds to the cost savings.

The Outokumpu factory also provides a lesson on why some kinds of steel are impossible to buy within the United States. Every batch of steel has its own recipe, concocted for specific customers. There are some recipes for the steel sold to the German high-end appliance maker Miele for drums which rotate inside washing machines as well as others for the blades of Swiss Army knives made by Victorinox. Outokumpu supplied textured stainless for a building within the fresh World Trade Center in Manhattan.

“which’s like baking cookies, nevertheless on a different scale,” said Niklas Wass, who oversees the Tornio works. “You need to specialize in certain things.” Mr. Wass stood on a scaffold overlooking a furnace as well as watched a worker, strapped which has a remote control apparatus, prepare a ladle of molten ore. “You only have so many melts. You need a certain volume to be economical.”

The process was mesmerizing. The worker positioned a ladle full of white-hot liquid ferrochrome in front of a huge oven. A door slid open to reveal a mixing vat glowing red through intense heat. The worker tipped the ladle, which was hanging through pulleys, in order which the ferrochrome poured into the vat. The stream of liquid shone so brightly which a visitor was advised to watch only through tinted film, as if which were a solar eclipse.

Once mixed, the steel cools for days before which is usually flattened into half-mile long strips. The steel is usually later rolled as well as hoisted into ships at a port, which Outokumpu operates, within a 10-minute drive through the factory.

Mr. Wass as well as additional Outokumpu executives were guarded about what effect the tariffs might be having on the Tornio operations. Toni Keranen, a labor representative, said so far there had been no major effects.

nevertheless there is usually an undercurrent of apprehension among workers, he said.

“They are aware of the tariffs as well as they are following the situation, as well as they are talking about which,” Mr. Keranen said.

Any disruptions could be dire for Tornio. which is usually not unusual for three generations of a family to work at the factory, Mr. Keranen said. “Right today, Outokumpu feels like a safe employer. If there was no Outokumpu, there would likely be nothing.”