Say it quietly but protectionism really works well, for the steel market at least. Bolting the door against imports has made a difference in the US and should do in Europe, too.

The US in particular has form. Back in 2001, then President George W Bush took action for steelmakers struggling with an economic recession and a strong US dollar.

In the three years up to late-2001, mills accounting for nearly a third of US steel capacity had filed for bankruptcy. In March 2002, the White House finally introduced blanket tariffs of 30 per cent on the price of imported steel products.

This action had a direct effect upon imports and US steel prices, which never fell that low again.

Then came the explosive growth of China’s own steel industry. Back in 2001 it exported 5.5m tons. Today it exports 20 times that, 13.5 per cent of its production. One reason: it makes too much. Less than three-quarters of its mill capacity gets used.

Nevertheless, steel prices have rebounded and may keep going. Just as a programme of infrastructure spending accelerated in China, the US government decided to protect its domestic industry with a new series of import tariffs from late 2015. Imports into the US, which had been on the rise, peaked last year.

The EU last year followed the US in setting its own trade tariffs. Though imports to the EU have yet to fall meaningfully, that has not stopped European hot rolled coil prices surging 77 per cent over 12 months.

Global steel shares did even better, nearly doubling over the same period. These jumps in market value discount a big recovery in earnings: the sector price-earnings multiple is now well above the decade average at 16 times.

Yet if history is any guide, profitability has much further to rise. Operating profit margins for the largest steelmakers — ArcelorMittal, Posco and Nippon Steel — average under 5 per cent, half the amount of a decade ago. Assuming prices can hold relatively steady, an improvement should follow.

That may sound a big “if” given China’s persistent excess capacity. Even so, trade barriers take time to dismantle, which should support steelmakers in the US and Europe for a while longer yet.

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