ConocoPhillips says steel tariffs increasing drilling, production costs

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ANCHORAGE, Alaska (KTUU) - Energy giant ConocoPhillips says tariffs on steel caused a “fairly significant” rise in drilling and production costs during the firm’s second quarter.

“We have been and are going to continue to see some inflation pressure, including the steel tariffs in the U.S., which is turning out to be a fairly significant item for us,” Al Hirshberg, executive vice president of production, drilling and projects, told investors on a conference call last week.

Hirshberg said Conoco spends about $300 million a year on pipeline, valves and fittings, all of which are made from steel. The firm expects the price tag to continue rising into next year.

“Hot-rolled steel prices in the U.S. since the first of the year are up 26 percent even though the input cost to the manufacturers of this steel hasn’t changed. And so there’s been a significant move in the market,” Hirshberg said. “We've been somewhat insulated from that from our supply chain position, but that is going to continue to grow on us going into next year.”

Alaska Gov. Bill Walker said the state may have to source steel from countries not impacted by tariffs, especially for steel-reliant projects like the multi-billion-dollar LNG pipeline. However, the governor also said he’s optimistic that international trade tensions will be resolved.

“Maybe the product will come from a different country if the tariff issue is not resolved. I truly believe it will be resolved, I think both sides want to resolve this issue so I think it’s going to be resolved,” Walker said Monday.

Speaking at an Anchorage Chamber of Commerce event Monday afternoon, Debbie Franklin with the U.S. Commerce Department’s International Trade Administration declined to answer questions about tariff impacts specifically. She did, however, encourage Alaska export businesses to broaden their horizons and consider new trade partners.

“China's not the only country in the world we could be shipping to. Taiwan or Vietnam or South Korea or wherever, not necessarily even the Pacific,” Franklin said. “We've got a lot of commonalities between the Nordic countries or maybe your product is something the EU could use.”

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