By John W. Miller and Chuin-Wei Yap
U.S. steel imports are approaching record levels, sparking the
highest number of trade complaints in more than a decade and
igniting calls for new import tariffs.
American steelmakers filed 38 trade cases last year, the highest
number since 2001, when the industry won White House backing for
higher tariffs and penalties on state-subsidized or otherwise
unfairly traded steel. The cases represent a wide variety of
products--from pipes used in gas drilling, to specialty pieces used
in electrical transformers.
Only two cases have been resolved, with one in favor of the U.S.
steel industry. But a dozen other rulings are expected this summer,
including for a closely watched case regarding steel used for oil
and gas drilling.
The surge in imports reflects oversupply abroad, which has cut
prices, and strong U.S. demand spurred by energy drillers and a
resurgent auto industry. First-quarter steel imports by U.S.
companies rose 36% from a year earlier to 10.6 million metric tons,
according to research firm Global Trade Information Services. That
was the highest level since the record 13 million tons reached in
2006.
The global steel industry has the capacity to produce over a
half-billion tons more steel than is made--twice the level of 2001,
according to a report released Tuesday by the Alliance for American
Manufacturing.
The report, which was backed by the steel industry, in large
part blames high levels of steel imported from China. Beijing on
Tuesday reported that steel exports last month reached their
highest level since 2008.
Many economists say the solution is to close some mills--in the
U.S. as well as abroad.
China said its steel exports are rising because they are
globally competitive. "China's policy is not to encourage
high-volume steel exports, but just to fulfill [Chinese] demand,"
said Chi Jingdong, deputy secretary-general of the state-backed
China Iron and Steel Association.
Manufacturers and steel processors generally oppose tariffs.
Domestic steel mills tend to use the trade laws as a "commercial
weapon, " said Jeff Himmel, president of Artco Steel Corp. His
White Plains, N.Y., company imports half its steel for processing
into plate which is then processed further into finished goods.
"Sometimes these trade cases are justified and sometimes they are
not."
Imposing new import tariffs would be only so fruitful, he said,
since "that one big anchor of excess world-wide capacity is still
there."
Foreign steel fetches discounts of as much as 20% but ordering
it is risky, said Lisa Goldenberg, president of Delaware Steel Co.
of Pennsylvania, a distributor. "I can order the foreign steel and
get it in August, but the domestic mills don't have a price for
August yet, so I don't know if it's a good deal or not," she
said.
The operators of U.S. mills, such as AK Steel Corp., U.S. Steel
Corp. and ArcelorMittal, want to slow imports of imported finished
steel. But many at the same time are big importers of raw steel,
said John Packard, the publisher of Steel Market Update.
AK Steel said it has always imported some steel as needed. A
spokesman declined to comment on proposed tariffs but said, "We
think we can always compete on a level playing field."
U.S. Steel cited the effect of low-price imports on its workers.
"It's not just those of us who work at U. S. Steel who are affected
by unfair trade--it's our families, neighbors and other business
owners," Ralph Mercado, a U.S. Steel expediter in Ohio, said in
news release.
ArcelorMittal declined to comment.
Trade friction between Washington and Beijing regarding steel
isn't new. But the recent increase in China's steel exports has
heightened the tension.
China's government vowed last year to reduce its excess
steelmaking capacity. But production has continued apace as Beijing
has worried about slowing economic growth.
The government on Tuesday said China's crude steel production
rose 2% last month to a record daily average of 2.3 million metric
tons. The previous record was set in March. China's steel exports
reached 62.3 million tons last year, just shy of the record set in
2007.
A handful of preliminary trade decisions have been issued, and
some tariffs have been levied. Washington this month imposed
preliminary tariffs of 159.2% on Chinese grain-oriented electrical
steel, which is used to make transformers.
A wave of rulings is expected this summer, the most closely
watched involving South Korean steel pipes and tubes used in
drilling for oil and natural gas.
The country shipped $818 million in such products to the U.S.
last year. U.S. trade officials in an initial ruling refused to
impose new tariffs.
Democratic Sen. Sherrod Brown of Ohio, a chief advocate for
tariffs, said U.S. manufacturers should accept slightly higher
prices for domestic steel. His state has several large steel
producers, mainly involved with items used in natural-gas
drilling.
"Drilling for the Marcellus Shale is a profitable business
already," he said in a conference call recently.
"It can be profitable using steel from Lorain, Ohio," he said.
"It's a little bit like arguing for people to buy a stolen TV just
because they're cheaper; they're breaking international law."
Write to John W. Miller at john.miller@wsj.com and Chuin-Wei Yap
at chuin-wei.yap@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires