By John W. Miller
PITTSBURGH--Western Pennsylvania, where much of the country's
heavy industry has its roots, was ground zero for an alleged
hacking scheme by the Chinese military.
In 2010, almost 30 employees of U.S. Steel Corp. received emails
from the alleged hackers, many appearing to be from then-Chief
Executive John Surma. Some contained the subject line "US Steel
Industry Outlook."
Instead, the emails were sent by Sun Kailiang, a hacker
affiliated with the Chinese military, according to a federal
indictment disclosed Monday. The emails allegedly were designed to
extract sensitive information from U.S. Steel employees during a
trade dispute over imports of steel pipes and tubes for the U.S.
oil and gas industry, one of the company's two key markets and
among the most lucrative customers in the global steel industry.
U.S. Steel had no comment.
The hackers also allegedly targeted the Pittsburgh-based United
Steelworkers union, which participates in trade disputes involving
imported Chinese goods, as well as three other Pittsburgh-area
industrial companies: Alcoa Inc., Westinghouse Electric Co. and
Allegheny Technologies Inc. The indictment says that "in some
cases, the conspirators stole trade secrets that would have been
particularly beneficial to Chinese companies at the time they were
stolen."
Mr. Sun, whom the indictment said also went by the name Jack
Sun, and four other individuals associated with the Chinese
military were charged in the case.
"We have pre-eminence in metals, and we have other important
industries such as nuclear power and we are the home of organized
labor," David Hickton, the U.S. attorney behind the case, said
about Pittsburgh in an interview. "And we are a target of cyber
hacking."
Chinese officials denied the allegations.
Although the alleged hacking exposed vulnerabilities in U.S.
Steel's security systems, the case could boost efforts by the
company and industry to gain new tariffs on imports.
Since the start of 2013, U.S.-based steelmakers, led by U.S.
Steel, have filed 40 trade complaints with the U.S. government,
including seven against China, the most intense period of trade
litigation since 2001, when the Bush administration imposed tariffs
on many steel products. U.S. trade officials are set to rule on a
dozen of the petitions this summer amid a fight over market share
fed by an oversupply of steel world-wide.
"There's an enormous amount of fraud by Chinese companies" in
trade disputes that hacking could have enabled, said Michael
Coursey, a trade lawyer with Kelley Drye & Warren LLP who
represents specialty-metals producer Allegheny Technologies.
An hour after the indictment was announced Monday, U.S. Steel
and the United Steelworkers hosted a rally urging new import
tariffs on foreign steel. U.S. Rep. Mike Doyle (D., Pa.) told the
gathering that, in light of the alleged hacking, "China picked a
fight with the wrong city."
Sen. Bob Casey (D., Pa.) in a statement urged the Obama
administration to take aggressive action, saying China's
anticompetitive trade practices have taken a dramatic toll on
Pennsylvania businesses.
The indictment says the emails allegedly sent by "John Surma"
allowed Mr. Sun to "steal host names and descriptions for more than
1,700 U.S. Steel computers" as well as data related to
"applications for U.S. Steel employees' mobile devices, and
physical access to U.S. Steel's facilities" in western
Pennsylvania.
Also, on at least four occasions between 2010 and 2012, hackers
"gained unauthorized access to [United Steelworkers] computers and
stole email messages and attachments from the accounts of six to
eight USW employees who would be expected to have sensitive,
nonpublic and deliberative information about USW's trade strategy
concerning China," the indictment says. "Each theft targeted
messages from a narrow window of time before the intrusion."
Union spokesman Wayne Ranick said the allegations "are quite
troubling and we are taking the matter very seriously." In an
interview last week, United Steelworkers President Leo Gerard said
China "chooses to most of the time not play by the rules."
Mr. Gerard met with lawyers Monday to discuss the alleged
hacking, said a union official. "We think it's pretty ludicrous the
Chinese government is bothering to spy on us," the official said.
"We don't have any secrets, we just think trade laws should be
enforced fairly."
China's steel exports rose to 7.54 million tons in April, the
highest monthly level since August 2008, shortly before the global
financial crisis. China's steel exports totaled 62.3 million tons
last year, just short of an annual record set in 2007.
Chuin-Wei Yap contributed to this article.
Write to John W. Miller at john.miller@wsj.com