Steel hurt by imports, panel finds

Decision appears to set the stage for tariffs or quotas

12 product lines cited

Beth Steel CEO hopes ITC's decision spurs Bush to act

October 23, 2001|By Kristine Henry | Kristine Henry,SUN STAFF

Domestic steel makers came closer yesterday to seeing implementation of the import restrictions they covet when a trade panel found that U.S. steel makers have been severely injured by imported steel. Although it doesn't address many of the issues plaguing the steel industry, the decision does pave the way for tariffs or quotas that could boost prices by limiting the amount of foreign steel sold in this country.

Largely blaming cheap imports, 25 domestic steel companies have filed for bankruptcy protection since 1997, including Bethlehem Steel Corp., which filed one week ago, and LTV Corp., Geneva Steel Corp. and Northwestern Steel and Wire Co.

The U.S. International Trade Commission looked at 33 product lines and ruled unanimously that 12 - including the hot- and cold-rolled steel that Bethlehem produces - had been seriously injured by steel imports. The dozen product lines represent nearly 80 percent of the steel produced in the United States.

"As the chief executive officer of the most recent steel company to fall victim to unfair imports, I am grateful that the ITC has recognized the damage our domestic steel industry has suffered and we look forward to a comprehensive solution by [President Bush] at an early date," said Robert S. Miller Jr., the recently hired chairman and chief executive of Bethlehem, which employs about 4,000 at its Sparrows Point plant.

Bethlehem has lost $1.4 billion this year.

"The vote at the ITC today was an overwhelming vindication of everything we've been saying for the past four years," Leo W. Gerard, president of the United Steelworkers of America, said in a conference call.

To find that the domestic industry had been injured, the ITC did not have to determine that the imports were "dumped" - sold in the United States for less than the fair market value - or that the importing countries broke any rules. It simply had to find a "substantial cause of serious injury, or threat of serious injury."

About 31 million tons of steel were imported by the United States in 1997. The amount rose 33 percent the next year to 41.5 million tons as the economic crisis in Asia drove steel makers overseas to seek new markets. Since then, imports have declined but are still far above 1997 levels.

At the same time, prices for hot-rolled steel were more than $350 a ton four years ago but now are at less than $250, and cold-rolled has dropped from $500 a ton to slightly more than $300.

The commission now begins the remedy phase, where it recommends actions such as quotas or increased duties. It has 60 days to send its proposals to President Bush, who has another 60 days to act on the recommendations. He could implement exactly what was recommended, he could enact a variation of it, or he could choose to do nothing.

While the ITC's decision could provide some short-term relief, it does nothing to remedy many of the other issues that have dogged the industry in recent years.

One of the industry's chief challenges is multibillion-dollar debt it has incurred as a result of its union contracts that promise workers and their dependents fixed-level pensions and health-care benefits.

Another is the fact that U.S. mini-mills, which make steel from scrap and use nonunion labor, typically have more efficient plants and are cheaper to operate. The slowing economy has also caused a slowdown in demand for steel - at any price - over the past nine months. "A trade remedy is not going to address that part of the equation," said Leo Larkin, a steel analyst at Standard & Poor's.

In fact, it could hurt in the long run, he said, because mini-mills will also benefit from higher steel prices and could use their beefed-up earnings to grab even more of the domestic market share.

In announcing his request for an ITC investigation on June 5, Bush said he would also order the Treasury Department and Commerce Department to talk with foreign governments about eliminating inefficient excess steel-making capacity worldwide.

"The U.S. steel industry has been affected by a 50-year legacy of foreign government intervention in the market and direct financial support of their steel industries," Bush said in June. "The result has been significant excess capacity, inefficient production, and a glut of steel on world markets."

Many foreign governments pay for workers' health care, which immediately lowers those companies' costs compared with American steel makers who must cover those costs under labor contracts.

Bethlehem owes $5 billion for the pensions for its 74,000 retirees and for health care benefits covering 130,000 current and former workers and their dependents.

Bush's request for an ITC investigation was only the fourth made by the White House since the Trade Act of 1974 was created. In 1976, then-President Gerald Ford directed the ITC to investigate mushroom imports. Ronald Reagan ordered the ITC to investigate stainless steel imports in 1982 and the importation of apple juice in 1985.

Shares of Bethlehem rose 7 cents yesterday to 50 cents.

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