U.S. Steelmakers’ Charge of Dumping Carries Weight

As clouds of puffy white smoke billow from National Steel Corp.’s towering blast furnaces, 20-ton steel coils are unloaded from a nearby tanker docked along the Detroit River.

The arriving steel is from Russia. It has been coming for months and is piled haphazardly like hay bales in a mown field a few feet from National’s property line, awaiting a buyer.

Turned rust red from exposure to the elements, the Russian steel, and a similar influx from Brazil and Japan, are fresh fodder for the lately dormant protectionist sentiment of America’s industrial heartland, which has felt the sting of foreign competition before.

Now, thanks to the crisis in Asia, U.S. steelmakers and workers say their future is imperiled again by a wave of foreign steel that has sent U.S. prices, production and profits tumbling, and layoffs rising. One small U.S. steelmaker has gone bankrupt already.

On Friday, the U.S. International Trade Commission agreed. The panel unanimously made a preliminary finding that U.S. steelmakers are being injured by imports. The vote triggers a formal investigation by the Commerce Department into whether steel is being dumped here--sold for less than it costs to make.

That is the charge leveled by the nation’s top integrated steel companies, mini-mills and the United Steelworkers of America, which on Sept. 30 complained that the three nations were dumping hot-rolled steel, a basic product used for structural applications or further processed into higher grades.

“This industry is being devastated,” declared Paul Wilhelm, president of USX Corp.’s U.S. Steel Group, the nation’s top steelmaker. He said Friday that the ITC ruling “validates the industry’s complaints.”

Steelmakers Seen as Crybabies

If this sounds familiar, it should. Trade disputes involving steel are nothing new. A third of all the dumping cases filed since 1980 involved steel. So quick are U.S. steelmakers to complain about unfair trade that they have long been regarded as crybabies.

“When it finds itself in difficulty, the U.S. steel industry always looks for a scapegoat,” said Christopher Stokes, a trade lawyer representing Brazilian companies.

But that reputation dates to the 1980s, when U.S. steel firms were the Rust Belt poster children for inefficiency and uncompetitiveness. Cheaper, high-quality steel from abroad captured a big chunk of the market.

Today’s U.S. steel industry, having undergone a deep and painful retrenchment that eliminated a quarter of a million jobs, is arguably the most competitive in the world.

Yet analysts say productivity and efficiency only go so far when confronted with the tactics that some nations, crippled by the trouble in Asia that has dried up demand for steel in much of the world, are employing today.

“The Russians are so desperate that they don’t care about price,” said Kenneth Hoffman, analyst for Prudential Securities. “They are just interested in getting hard currency.”

Friday’s preliminary finding by the ITC could lead to a ruling as early as February on the dumping charges. That could result in retroactive duties of nearly 200% on the imported steel. Meanwhile, additional cases against steel products from other countries, most notably South Korea, are expected.

Despite the dramatic numbers for hot-rolled steel--a tripling of tonnage from Japan, Russia and Brazil and a price plunge of nearly 20% since last winter--analysts say the claims of dumping might be difficult to prove.

One complicating factor is the huge currency devaluations in the exporting countries. Currency values have plummeted by half or more in Asia and Russia, which makes their exports dramatically cheaper in dollars.

And foreign steel producers say the current glut is related to surpluses caused by the two-month strike against General Motors Corp. and a slump in the oil industry that caused an unexpected buildup of steel pipe and tubing inventory.

“Imports aren’t causing any injury, and if there is any, it is transitory,” said William Barringer, a Washington-based trade attorney representing Japanese and Brazilian steelmakers.

Says Greg Mastel, vice president of the Economic Strategy Institute, a think-tank that supports anti-dumping laws: “It is a close call.”

The initial dumping cases are being watched closely because they raise the specter that the Asian economic calamity is giving rise to increased protectionism around the globe, a danger from the beginning of the crisis more than a year ago.

In the U.S., there are growing concerns that steel is the leading edge of an import tide that will soon swamp other industries, including textiles, machine tools, computer chips and auto parts.

But the foreign steel producers note that U.S. consumers could pay higher prices for everything from autos to refrigerators if the dumping charges are upheld. Some U.S. manufacturers, such as GM, have filed briefs opposing the unfair trade actions.

“We are being asked through law to provide relief for the steel industry at the expense of the overall economy,” said Daniel Griswold, a trade specialist at the Cato Institute, a free-market think tank.

The issue is also problematic for the Clinton administration, which advocates free trade and hopes to foster a recovery in Asia before its woes engulf the U.S. economy. But the president, who won key labor support in the November elections, is telling trading partners that they cannot export their way out of trouble at the expense of U.S. jobs.

After meeting with steel officials last week, President Clinton on Tuesday bluntly warned U.S. trading partners that he would not tolerate dumping of low-cost products on U.S. markets.

For the industry, the predicament marks a reversal of fortunes. After a retrenchment that closed scores of hulking plants and entire companies, costing 260,000 jobs, it has more than doubled productivity. For the last four years, steelmakers have enjoyed the fruits of their struggle. Hefty profits and orders rolled in. But from January through August (the last figures available), 26.7 million tons of steel were imported into the United States, a 25% increase over the same eight-month period in 1997. Overall shipments from Russia jumped 29%, from Japan 141%, and South Korea 96%.

As imports surged, prices tumbled. U.S. steelmakers say they are being underpriced by as much as $100 a ton.

“This is a period of high demand, yet prices have been in free fall,” said Adam Wolff, a Washington-based trade attorney representing U.S. steelmakers. “It’s dumping and it’s causing injury.”

Pain Has Hit Big Giants, Mini-Mills

The pain has hit the big integrated giants like U.S. Steel and Bethlehem Steel, which have reduced output and announced layoffs. It hit modern mini-mills like Nucor Corp., the lowest-cost U.S. producer, which has cut prices and trimmed production 40% at one plant. A small independent, Acme Metals Inc. near Chicago, cited imports as a cause of its recent bankruptcy.

At National Steel, the nation’s fourth-largest steelmaker, the influx of imports forced the recent shutdown of a 1.1-million-ton capacity blast furnace at its Great Lakes Division plant near Detroit. It marks the first time National has idled a blast furnace since 1982.

The company, which, ironically, is controlled by NKK Corp. of Japan, expects shipments to fall 17% this year despite the nation’s robust economy. Most of the 2,900-strong hourly work force is protected from layoffs under the current labor contract, but they are worried. Nearby Rouge Steel just shed 45 workers, the first layoffs in 10 years.

“All our jobs are in jeopardy,” said Dan Couture, president of USWA Local 1299.

Then again, winning the dumping cases won’t eliminate the worldwide glut of steel.

“A case can be made for dumping and probably won,” said Donald Barnett, an independent steel consultant and economist based in Falls Church, Va. “But it’s not going to solve the problem any time soon. This is a contagion that can make everyone ill.”

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Steel Dumping?

U.S. steel companies say profits have been hurt by a surge in imports from nations whose economies are struggling.

Source: Commerce Dept.