🔒Q&A: Tariffs on Canadian steel are putting a Northbridge manufacturer at a competitive disadvantage to China, Europe

Northbridge-based welded wire mesh manufacturer Riverdale Mills changed the lobster industry forever in the 1970s when the company introduced Aquamesh, a marine-grade mesh engineered to last longer and be lighter than traditional wood traps. The company’s product is now used to build 60% of all lobster traps in North America, with Riverdale’s 3,500+ wire mesh configurations being used across a number of industries across the world. Riverdale exports its materials to more than 60 countries, with 40% of its products destined for international markets, according to a Sep. 25 company press release. Riverdale’s main source for steel has traditionally been foundries across the border in Canada, but the President Donald Trump Administration’s tariffs have had a big impact on the company’s operations. Riverdale Mills CEO Jim Knott Jr. sat down with WBJ to explain, whatever their intent, Trump’s tariffs are making business more difficult for this 45-year-old firm.

What has been the impact of tariffs on Riverdale Mills?

Under the first Trump Administration, we paid about $1 million worth of tariffs. So far this year, we’ve paid about $500,000 since the steel tariffs were reinstituted.

The intent of the tariffs is to bring business and jobs back to the United States. Is this approach working?

I don’t think additional steel-producing capacity in the country is needed, because there’s plenty of capacity worldwide. One of the things people lose sight of is only 2% of the steel the United States consumes is from China. A lot of finished products made from steel come from China, and they’re not being tariffed. If you’re going to continue with tariffs, they should be on derivative products made from steel. Leave the raw materials alone. The other issue is we export 40-50% of what we make. That means a Chinese or European competitor is paying $400 to $500 for a ton of steel, while we’re paying $1,000 to $1,100. That automatically handicaps us from a production standpoint. We run a tight ship in terms of labor and other costs. We’re highly automated. What allows us to compete is being able to source our materials competitively, and the tariffs prevent us from doing that. I don't really look at Trump’s intent with the tariffs. I look at the outcomes, and what happens in our particular circumstance. The outcome is not great. We export a lot of the product, so handicapping us with high raw material costs tends to hurt us.

Why are Canadian steel producers critical to Riverdale’s operations?

There are very high-quality producers up in Canada. One of them is called ArcelorMittal, and the other one is Ivaco. Both make high-quality materials, but what you have to remember with steel prices, a lot of the cost associated is with transportation. When we ship products from Canada, we have about a penny or a penny-and-a-half per pound in freight costs. If I reach out to plants in South Carolina, Texas, or Chicago, it costs 6 to 9 cents. It’s better for us to trade with our local partners in Canada. Some of the new mills being built are even further out west. That makes it even more difficult, and we don’t see much steel coming up from Mexico that is cost effective.

How are the markets handling the uncertainty caused by the sudden course changes with Trump’s tariffs and social media posts?

The uncertainty is a major concern. What a lot of customers did early on in the first and second quarter was they stocked up on material, because they weren’t sure what was going to happen. Now, some of that material is being depleted, and they have to come and reorder. So we’ve seen some uptick on a little more product being ordered, but it’s still very volatile. Some days we get a very large order, and other days we’ll see next to nothing. That’s the consumer reacting to social media things. One thing we’re trying not to do is hoard material. We don’t want to overbuy, because if the tariffs go away, you don’t want to be stuck with material that has tariff costs associated with it. So we’re trying to run at a very level pace and match orders with demand.

How does the disruption caused by tariffs compare to prior challenges?

There’s always challenges. During 2019, we went through another tariff situation. One thing we did in 2019 is not raise our prices. This time around, we raised prices, and that helped mitigate some of the pain. One of the reasons why it was easier to do that was there had been a lot of talk around tariffs. People knew they were coming. We started off with the tariffs at 25%, and then they notched them up to 50%. That shocked a lot of people. One thing people lose sight of is we have to order our steel about a month or two in advance. You can’t spot-buy steel. People aren’t making it to put on the ground and speculate. You have to order it, and then you have to take it. We’ve had shipments with 25% tariffs on them, and then by the time it was ready to ship, tariffs were at 50%. We got together with our vendors and negotiated. We paid a little, and they took a little. The uncertainty is there, and it’s difficult to manage; but you just have to pay attention t what your true demand is. This interview was conducted and edited for length and clarity by WBJ Managing Editor Eric Casey.