U.S. steelmakers worrying as imports are surging Strong dollar buys bargain tons from overseas

Basic materials

July 03, 1998|By Sean Somerville | Sean Somerville,SUN STAFF

Boosted by the decline of Asian currencies, steel imports are surging and worrying U.S. steelmakers such as Bethlehem Steel Corp.

Steel imports hit record levels in April, rising to 3.26 million tons -- the highest monthly figure since the 1970s, according to the American Iron and Steel Institute. The April numbers are up 21.3 percent from March and 20.6 percent from a year ago.

"Imports are up substantially, to one of the highest months ever," said Curtis H. Barnette, chairman and chief executive officer of Pennsylvania-based Bethlehem Steel. "We have it under very, very active review."

For the first four months of the year, imports were 10.9 million tons -- 1.6 percent higher than last year's pace. Imports from Japan were 94.8 percent higher than in the year-ago period, while Korean imports jumped 44.7 percent.

The declines of Asian currencies against the dollar make steel from those countries less expensive than American-made steel. The resulting imports increase the quantity of the cheap steel in the market, cutting U.S. shipments and prices, Barnette said.

Charles Bradford, an independent steel industry analyst, said Asian imports are priced at about $260 a ton for hot-rolled steel, compared with about $330 sought by domestic steel companies.

"Part of what helped American steelmakers in the last couple of years is the impact of the dollar going down," he said. "Now the dollar is going back up again."

For Bethlehem, which employs about 5,100 people at its Sparrows Point plant, rising imports are one of a few variables that crimp what has been a year of improving profits.

The General Motors Corp. strike has cut shipments from the company's Burns Harbor, Ind., plant by about 2 percent.

In addition, Bethlehem may find its competition getting tougher. The reason: Prices for scrap metal, the raw product used by low-cost electric furnaces known as minimills, are going down as scrap demand softens in the Far East, Bradford said.

Put simply, all steelmakers are going to have to deal with lower prices. But minimills are likely to benefit disproportionately from lower costs.

Bethlehem, which is building a $300 million cold-rolling steel mill at Sparrows Point, also faces competition from other U.S. steel companies that are building similar mills. Additional cold-rolling capacity will soften those prices, Bradford said.

The price gap between hot-rolled steel, a basic product, and cold-rolled steel, a more finished and valuable product, has narrowed from about $140 to $105. "I expect that to go down to $80," Bradford said.

Barnette said Bethlehem Steel is monitoring all the various challenges closely. He said that, while imports are on the rise, demand remains strong and the company's order book is filled.

He conceded that imports have the potential to hurt profits, cut ++ jobs and halt capital projects. But he said, "We're not there yet. We're at a point where we have a very heightened concern."

There's no sign of imports slacking. Bradford said his tracking of Japanese exports suggests that the nation exported 588,000 tons to the United States in May, more than three times the amount of May 1997.

The imports that concern Bethlehem the most are those of coil plate and hot-rolled steel, which together threaten not only Sparrows Point and Burns Harbor, but also the company's newly acquired Lukens plate division.

Investors may also be taking note of imports. Bethlehem's shares, at $17.125 on April 20, closed yesterday at $13.3125.

Barnette, who contends that many imports are illegal, said U.S. steelmakers may file protests aimed at stemming imports. "I'm always concerned about unfair trade, and I will be until we get foreign markets opened," he said.

Pub Date: 7/03/98

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