By Rod Lee
Misconceptions about the state of the steel industry in general and the status of the Riverdale Mills Corp. in particular were much on James Knott Jr.’s mind when he agreed to discuss where things stand the afternoon of January 29.
Seated at a conference table above where Riverdale Mills’ machinery hummed and throbbed in the creation of products for the marine, security, construction and agricultural industries, Mr. Knott first corrected the idea put forth in a recently published report that the company was laying workers off. The “cyclical” nature of the business did require some belt tightening but this was achieved through attrition, Mr. Knott said, confirming the message being delivered by Jane Meehan Lanzillo who is director of corporate communications for Riverdale Mills.
As signage posted at the entrance to Riverdale St. from Providence Rd. in Northbridge also notes, “we’re hiring,” Mr. Knott said. “Engineers, shop-floor people, accounting and sales people. We’re doing fine.”
As strong evidence of its well-being, Riverdale Mills has installed a massive “cogeneration power plant” made by General Electric—a system that utilizes exhaust energy from gas turbines to produce steam in a heat exchanger. The energy spawned from the unit is captured and recycled to provide hot water or steam for heating or cooling. GE touts the system as significantly more efficient and cost-effective than traditional power generation. Mr. Knott could not wait to show off the cogeneration power plant in leading a visitor to the ground floor of the building at the conclusion of the interview (he also pointed with pride to a remodeling that has been accomplished on the main floor, on which the company’s offices are located).
The cogeneration power plant is just another example of Riverdale Mills’ forward thinking in maintaining a position as a leader in its field, as it has been, for instance, with such products as PVC coated mesh, Aquamesh and WireWall. Says Ms. Lanzillo, “85% of all North American lobster traps are made with Aquamesh; over 70% of oyster traps, crab and crawfish traps are made with Aquamesh; WireWall security fencing is used globally for borders, embassies and military bases and has provided employment opportunities in Central Massachusetts for almost forty years; SoftStep is used for flooring in poultry/breeder houses; gabions and mattresses made with Riverdale Mills steel mesh are used in major construction projects worldwide.”
The cogeneration power plant reflects Mr. Knott’s adamant fervor for “environmentally conscious energy sources,” Ms. Lanzillo said. “This is just another aspect of it, as is the generation of] hydropower” at Riverdale Mills and Jim Jr.’s “passion for maintaining the integrity of the mill pond and the wildlife there.”
When during the earlier conversation the subject of “U.S. Section 232 tariffs” on the aluminum and steel industries came up, Mr. Knott indicated that he is not a big fan of what has been referred to as President Trump’s “signature trade policy.” As a result of the tariffs, the first round of which were imposed in March of 2018, “all domestic steel mills raised their prices, from $520 a ton to $940 a ton,” Mr. Knott said. “So all of our raw materials escalated almost 100%. We export about 45% of what we make,” he said, which, in Riverdale Mills’ case, represents “65% of our cost of goods sold.”
In observing that most of Riverdale Mills’ raw material is coming from Canada, Mr. Knott said “in the political world, China is the bad guy, but China is not even in the top 10%” of suppliers of raw material to American steel manufacturers. That distinction belongs to Canada (17%), Brazil (14%) and Korea (10%), he said.
Between the higher price for raw material and “profiteering” by suppliers like Nucore (the largest producer of steel in the U.S., with which Riverdale Mills does business from Nucore’s Wallingford, Connecticut site) that accompanied it, “the 232 tariffs put us in a bind,” Mr. Knott said.
“Section 301 tariffs for consumer products,” like chicken wire and cooking pans, are slightly less burdensome despite the high cost of raw materials because of Riverdale Mills’ “competitive pricing,” he said.
The government does allow for the filing of “exceptions” to the tariff policy, Mr. Knott said. “We filed for 120 of these and got approved for seven, and Nucore lodged objections to many of them.”
Riverdale Mills “supports protecting our national security and economic risk but the current execution strategy is harming the very sector it was intended to protect—U.S. manufacturing,” Ms. Lanzillo said. “Section 232 has dramatically increased Riverdale Mills’ cost of doing business.”
The tariffs “are not helping, not in our industry,” Mr. Knott said. “They’re hurting. But we are different from other companies. We’re exporters. It hurts if I don’t have affordable raw materials. I’m totally anti-tariffs in the industry. It’s an exploitation of the consumer.”
Policies like President Trump’s, he said, “should be judged not on their intent but on their outcomes.”
Mr. Knott’s stance mirrors that of some other steel-industry executives including Chris Casey who is president of the Independent Steel Alliance. At an industry summit in Las Vegas last month Mr. Casey advocated for “quotas” instead of tariffs, describing quotas as “the lesser of two evils.” They at least “allow for material in,” Mr. Casey said. John D. Foster, president of Kurt Orban Partners and chairman of the American Institute for International Steel, disagreed, asserting that he does not see quotas as “a viable solution in dealing with global steel overcapacity”—for instance. Thus, a debate involving Section 232 tariffs that has yielded mixed views about the best course of action.
Like Mr. Knott, those gathered in Las Vegas said they had “issues” with the Section 232 exclusion process.
Like him, they see overcapacity as counterproductive to their trade. “The world’s capacity to produce steel is at 2.3 billion tons, demand is at 1.4 billion tons,” Mr. Knott said, so production is almost double what is required. “So why are we adding capacity” that isn’t needed?”
Contact Rod Lee at [email protected] or 774-232-2999.
Where there’s a welding machine…steel wire undergoing processing at Riverdale Mills.
A view of the Riverdale Mills facility from the edge of the mill pond in front of the building.