Steel firms try to repel import tide U.S. coalition seeks to cut off Japan, S. Korea and Russia

Illegal dumping alleged

Minimills supportive as the majors prepare for a legal offensive

Basic materials

August 31, 1998|By CHICAGO TRIBUNE

Smarting from an unprecedented tidal wave of low-priced imports, the U.S. steel industry is mounting a massive counteroffensive against many of the world's biggest exporters.

In what would be the broadest assault on foreign steel in at least six years, an industry coalition is building a legal case to effectively cut off steel imports from Japan, South Korea and Russia as well as smaller exporters in Asia and the former Soviet bloc in Europe.

Chief executives of most of the nation's major steel producers gave tentative approval last week to preparing a formal trade complaint, accusing mills in these countries of illegally dumping steel in the United States.

The executives will meet with international trade attorneys in Washington in the coming weeks, when they are expected to give their final go-ahead. They add that they hope to lodge their complaint, which would seek price-boosting duties on imports, as soon as late next month.

"Imports have come on like gangbusters," said Paul J. Wilhelm, president of USX Corp.'s U.S. Steel Group, who is coordinating the industry's efforts.

A steel blockade could hinder economic recovery in the accused nations by depriving them of dollar-denominated orders they desperately need to offset the continued erosion of their domestic currencies and tumbling industrial economies. But it could halt a vicious price war in the United States that is cutting domestic sales, profits and stock values and is forcing some companies to shut down facilities and trim payrolls.

As in previous trade complaints, such as a 1992 broadside against mills in nearly two dozen foreign countries, the industry's effort is being led by old-guard companies such as U.S. Steel and Bethlehem Steel Corp. These companies typically make high-end products such as automotive steel but are vulnerable because they have higher fixed costs.

Unlike in the past, though, these industry giants are getting support from so-called minimills, smaller upstarts that are low-cost makers of commodity-grade products, but which are getting bruised as badly by imports this year as are their bigger, older brethren.

"I don't know an industry sector that hasn't been affected by the gross influx of imports," said Tom Danjczek, president of the Steel Manufacturers Association, a trade group for minimills. "It's virtually across the board."

The minimills are not planning to join the integrated producers in lodging a trade complaint with the federal government, but will ,, take a complementary course by pressing the Clinton administration and Congress to negotiate strict import-capping trade pacts.

They say the industry needs a series of bilateral agreements because they could roll back imports more swiftly than a trade complaint can. Trade disputes can take up to a year to reach a final ruling, as the International Trade Commission and the Commerce Department each must make a succession of findings.

Often, though, importers retreat as soon as an anti-dumping complaint is filed because duties can be collected on any goods that arrive after the filing date.

U.S. steelmakers had been bracing for an upsurge of imports since last year, when the emerging economies of Asia's Pacific Rim plunged into a financial and economic crisis and Japan fell into a full-blown recession.

But with U.S. demand outstripping domestic steel output, rising imports had little immediate impact on the U.S. steel market. Then the manufacturing economy began slowing, just as foreign mills dramatically upped their shipments to the United States.

Through the first half of 1998, imports from Japan are 113.7 percent higher than a year earlier, while imports from South Korea are 89.5 percent greater. Russian shipments also exceed 1997's record tonnage.

Altogether, foreign steel accounted for more than one-fourth of consumption in the first half of 1998. Based on year-to-date data, steel executives project that imports will top 35 million tons this year, surpassing 1987's record total of 31 million tons.

While the overall numbers are troubling, integrated steelmakers are particularly concerned that Japanese steel mills now have captured almost one-third of the flat-rolled steel market -- what Wilhelm called "the meat and potatoes" of the U.S. steel business.

Bethlehem is betting $300 million on a cold-rolling mill that it is building at Sparrows Point to produce flat-rolled steel.

By itself, an increase in imports violates no trade laws, no matter how big or sudden. Since 1992, when a multilateral trade pact expired, foreign mills have been free to sell as much steel to American customers as they want.

But U.S. trade law prohibits a practice known as dumping -- selling goods in America for lower prices than in foreign producers' home markets or for less than the cost of production. And, judging from recent import prices, many Asian and former Soviet bloc nations must be dumping steel, industry executives assert.

As an example of what he labeled "insane pricing behavior by our foreign competitors," John D. Correnti, president of Nucor Corp., said a subsidiary recently bought 6,000 tons of steel on the Gulf Coast from Pohang Iron & Steel Co. of South Korea for $60 a ton less than Nucor's own costs.

Pub Date: 8/31/98

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