This Week in Earnings – Q4’24

Executives Highlight Robust Local Supply Chains Minimizing Potential Tariff Impacts; Anticipation Surrounding Reshoring and Nearshoring Gains Momentum

• Cabot ($5.0B, Specialty Chemicals): “Our current guidance does not include any adverse impacts from the tariffs announced over the weekend between the U.S. and Mexico, Canada and China. Given the timing of the tariff announcements and related delays, we are still assessing the potential impact. The impact could be a bit different by country. For China, we import a very limited amount of volume…into the U.S., so we expect the direct impact of these tariffs to be minimal. If production in China is reduced for tires or other exported products, then our demand in China could be impacted. However, we would then expect to see production levels outside of China potentially increase. For Mexico, where we operate one…plant, we expect a minimal direct impact on our production…as it is primarily sold into the Mexican market. For Canada, we operate two plants that manufacture products for our reinforcing carbons, specialty carbons and specialty compounds product lines. A large portion of the production at these plants is sold in Canada, but also there is production sold to customers in the U.S.”
• Ecolab ($68.3B, Specialty Chemicals): “[Regarding tariffs], with what we know now, we don’t see a big impact on our business for a very simple reason, which is that 92% of what we sell is produced locally. And in places like China, it’s 99% of what we sell is produced locally. So, we’re well protected from a supply chain perspective. That’s the reason why, tariffs for now, [are] not a big deal for the company, and hopefully, it’s staying so. And if it doesn’t, I’d like to remind you that a few years back we established a surcharge mechanism that we used for the energy spike in 2022. Well, this is a mechanism that, in the extreme case, we can use as well. We’re not planning to, but we’re prepared to use it if we need to.”
• Minerals Technologies ($2.5B, Specialty Chemicals): “I’ll give some perspective on the current tariff situation and potential implications. As we’ve said previously, we primarily source and sell locally in the regions where we operate, which does insulate us from the impact of tariffs. You can see that a very small portion of our cost of sales is imported into the U.S. To put this in perspective, the 10% additional tariff on China would increase our cost by approximately $2M on an annualized basis. We also move a small percentage of our finished goods across borders in North America. The potential impact of the proposed tariffs on Canada and Mexico would be approximately $10M. The actual impact of all these tariffs, though, would be less as we have multiple mitigating actions we would take — for example, shifting production between our facilities, if necessary.”
• Avery Dennison ($15.5B, Packaging & Containers): “Our direct exposure to tariffs is very limited. One of the strengths of our business is that we’re really good at scenario planning. We’ve proven that over time. And no matter where there are policy changes, geopolitical risks, we tend to have scenarios planned out for those. I’d also say, as a point of general reference, we largely procure and produce and sell in the same region. And when we procure internationally, we have multiple suppliers that we’re able to leverage. I’d especially say our global network also allows us to have the capability to flex production wherever we need to. And that’s a really strong key competitive advantage for us.”

Reshoring/Nearshoring 

• Martin Marietta ($33.8B, Building Materials): “If we think about more indirect impacts from tariffs, we could certainly see it drive more reshoring and more domestic manufacturing demand. And I think that goes back to supply chain. And it could impact inflation in some degree, and that could lead to maybe higher for longer, and that could have a negative impact on real estate or residential as we look at it.”
• Eastman Chemical ($10.9B, Specialty Chemicals): “First, the circular investment is about building infrastructure in America and reshoring jobs and building supply chain resiliency. When you think about the products that come off of this facility for food packaging, medical and a variety of other vital consumer durables, we need to have that resiliency in this country. And we’re onshoring jobs from Asia to Texas. We’re also going to create a lot of jobs downstream of this, as people want to lever into reshoring manufacturing and supplying raw materials to them, and importantly upstream of us.”
• Nucor ($24B, Steel):“Manufacturing construction starts have slowed, but we will continue to see demand for steel products from these complex projects for several years to come. Overall, we’re encouraged by the pro-growth and fair-trade philosophy of the new administration. These policies are well-aligned with the rebuilding, repowering, and reshoring of the U.S. economy, which should continue to drive demand for steel. And as America’s largest and most diversified steel producer, Nucor is well-positioned to supply those needs.”
• Steel Dynamics ($19B, Steel): “Non-residential construction remained stable with slowdowns across some industries. However, we believe moderating interest rates will unlock pent-up project work and create new opportunities as we progress into 2025. Additionally, onshoring and infrastructure spending should provide further support to fixed asset investment and related construction-oriented projects.”