Facing off on steel tariffs

Mills, carmakers split on trade law

October 17, 2006|By Allison Connolly | Allison Connolly,sun reporter

Executives from the nation's largest steel manufacturers, including Sparrows Point owner Mittal Steel Co. NV, will face off with automakers today over tariffs on foreign-made corrosion-resistant steel.

DaimlerChrysler, Ford, General Motors, Honda, Nissan and Toyota want the U.S. International Trade Commission to drop the duties on imports from Australia, Canada, France, Germany, Japan and South Korea, a request fiercely resisted by steelmakers.

Both sides will present their case to the commission in Washington today.

The duties have been in place for 13 years and were last reviewed in 2000, when an unprecedented number of steel companies were in bankruptcy. Since then, the industry has endured a painful consolidation.

FOR THE RECORD - An article in the Business section yesterday about tariffs on corrosion-resistant steel misattributed a quote by an auto industry executive. It was Steve Begun, Ford Motor Co. vice president for international governmental affairs, who said that the steel industry was making "a cottage industry" out of such tariffs.
THE SUN REGRETS THE ERROR

The showdown comes at a time when the remaining steelmakers, while profitable, are seeing demand soften, putting pressure on prices. In addition, giant global companies like Mittal are pressuring their operating units to lower costs and increase efficiency.

The two sides each held conference calls yesterday to lay out their positions.

The automakers contended that a resurgent steel industry remains healthy and no longer needs protection.

In fact, steelmakers are exploiting their hold on the market, said Richard Cover, GM's commodity manager for steel. Of the six companies that make the product, three dominate, he said.

One "major, integrated steel producer" threatened to shut down production rather than accept a lower price from GM, Cover said. He declined to say which steel company made the threat.

Nissan's purchasing director, Cal Vickers Sr., accused the steel industry of making a "cottage industry" out of such tariffs.

"They are powerful, profitable and able to compete under normal conditions," Vickers said during the conference call.

Though the remaining steel companies are profitable, prices are beginning to come down from record highs as orders slip.

In a memo to workers Sunday obtained by The Sun, United Steelworkers Local 9477 President John Cirri said orders for the quarter as of November are off by 130,000 tons, about half of the Baltimore County plant's typical monthly volume.

Cirri did not return a call yesterday seeking comment.

In anticipation of an overall weak fourth quarter, an undisclosed number of Sparrows Point workers are taking voluntary layoffs of up to five weeks through the end of the year.

Mittal plans to temporarily idle two of its biggest blast furnaces, in Cleveland and East Chicago, Ind., in response to reduced demand.

Lou Schorsch, chief executive officer of Arcelor Mittal Flat Products Americas, said that while steel prices are high, the steelmakers have had to deal with a rise in the cost of energy and raw materials.

Corrosion-resistant steel, among the products made at Sparrows Point, is also used by construction companies and appliance manufacturers.

In a separate conference call yesterday defending the tariffs, steel executives said the product is their most innovative.

"It's high-end, high value," said John Goodish, executive vice president and chief operating officer of U.S. Steel Corp.

Nearly 80 percent of the coated product made last year at Sparrows Point was sold to the construction industry for such things as roofing, siding and heating and air conditioning equipment. The rest was sold to steel service centers and appliance manufacturers, according to company literature.

The plant developed its own coated product, a stainless-steel look-alike called Sleek AZ, which was patented by longtime former owner Bethlehem Steel Corp.

Bethlehem filed for bankruptcy and in 2003 sold its assets, including the Sparrows Point mill, to International Steel Group. ISG sold out to Mittal last year.

Thomas Russo, Sparrows Point general manager, told The Sun in April that he hoped to reopen a fourth line for coated products to produce Sleek AZ if the market stayed strong. He did not respond yesterday to a call seeking comment.

Car manufacturers made their proposal as steelmakers face increasing competition from China and India. They are most concerned about China, where government subsidies enable companies to sell steel at less than cost. They fear the Chinese will "dump" their excess steel on the U.S. market at prices they can't compete with.

Though China isn't one of the countries under trade commission review, the steel executives say China would be encouraged to dump steel here if the tariffs were lifted.

The six-member International Trade Commission is expected to vote on whether to keep the tariffs Dec. 14.

allison.connolly@baltsun.com

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