The Wall Street Journal reports two multibillion-dollar projects President Donald Trump plans to restore U.S. manufacturing prowess are “easier said than done.”
As part of Trump’s push to revive U.S. iron-ore mining, steel production and East Coast shipbuilding, Trump is pushing a $5 billion shipyard project in Philadelphia, but analysts say the project needs more space for shipbuilding, and it has challenges attracting more customers beyond its owner, Korean company Hanwha Shipping.
Meanwhile, in Iowa, a company with an unproven record in the U.S. steel industry, is developing what it claims will be one of the largest and most expensive steel mills in the country.
“But the two projects have attracted doubts about the soundness of the business plans — and drawn comparisons to other ambitious Trump plans that didn’t pan out,” reports the Wall Street Journal, “like when Taiwan’s Foxconn seemed set to produce high-definition screens at an enormous, $10-billion plant in Wisconsin.
Supply-chain problems and high costs in the Foxconn endeavor got the project downsized, says WSJ, and part of the site was later converted to a mere data center.
The Wall Street Journal reports that South Korean President Lee Jae Myung and Trump made big news about Hanwha’s $150 billion investment in the U.S. shipbuilding industry. But since then, no other Korean firms have shown interest in investing in U.S. shipbuilding.
“The current order book beyond the Hanwha order consists of three containerships for Hawaii-based Matson Inc. at $330 million each,” reports WSJ, which is “twice the price of a mega vessel built in South Korea or China.”
“It’s hard to justify a high valuation multiple for a U.S. shipbuilder like Philly from a foreign buyer, based on pure economics,” said Basil Karatzas, head of consulting firm Karatzas Marine Advisors.
In Iowa, Trump’s planned Mesabi mill will require Mesabi to staff itself with people familiar with an industry the company itself has never worked.
“Although its parent company, India’s Essar Group, previously built and operated steel mills in India … Mesabi took nearly 20 years to complete its iron-ore mine in northern Minnesota, overcoming years of delays, missed deadlines and a bankruptcy,” reports WSJ.
Worse, the mill could become a victim of its own success if it manages to increase the U.S. steel supply. The company purports to add up to 10 million tons of steel annually to the U.S. market.
“You’re going to have excess production capacity, and that’s going to create much more competition between mills to drive down prices, and that hurts profits,” said Josh Spoores, an analyst for steel market forecaster CRU.