Global Steel Trade; Structural Problems and Future Solutions

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9.2% 22.5% 1997 1998 1999 Asia Europe United States Latin America Other Source: World Trade Atlas. 3.5% 17.7% 27.8% 32.6% 7.9% 8.2% 5.2% 19.7% 16.8% 25.5% 25.9% 16.4% 15.5% 37.0% 29.9% 3-41. Brazil—Distribution of Total Exports (1997–1999) 32.6% 42.2% 4.0% 2.7% 30.8% 11.5% 41.7% 13.2% 6.3% 4.6% 31.6% 1997 1998 1999 Asia Europe United States 15.3% 42.2% While overall U.S. steel imports from Brazil declined from 1997 to 1998 (mainly due to a decline in semifinished steel imports), imports for some product categories increased. Hotrolled steel exports to the United States increased by 67,000 MT, or roughly 17 percent in 1998. 41 From 1997 to 1998, the percentage of Brazil’s hot-rolled exports shipped to the United States grew from roughly 33 percent to more than 41 percent. Meanwhile, exports of coldrolled steel to the United States nearly doubled between 1997 and 1998, climbing from 122,000 MT to 225,000 MT, representing an increase in the percentage of Brazil’s total cold-rolled exports going to the United States from 45 percent in 1997 to 59 percent in 1998 42 (Chart 3-43). 43 Efforts to Maintain Export Levels to the United States Latin America Source: World Trade Atlas. Other With the collapse of demand in its most important export market and the sudden decline of demand at home, Brazilian 3-42: Brazil—Distribution of Hot-Rolled Steel Exports (1997–1999) steel producers cut their U.S. dollar export prices for certain products to retain export levels and maintain production and capacity levels. In 1998, almost 26 million MT of crude steel were produced, a decline of just 1.5 percent from the previous year. 44 Sales in the United States remained profitable because companies were able to cut prices in line with the depreciation of the Brazilian real. Despite rapidly dropping U.S. prices, especially in the second half of 1998, the consistent depreciation of the real during 1998 kept pace with the U.S. dollar price declines and allowed Brazilian producers to generally maintain their revenues in real terms on U.S. sales. In 1998, Brazil’s largest steel producers were profitable, 45 although their net profits did decrease from 1997 levels. Between December 1997 and December 1998, the average unit value of imports of carbon hot-rolled steel 46 from Brazil dropped from $324 per MT 47 to $263 per MT (Chart 3-44). Similarly, during the same period, the price of imported carbon cold-rolled steel from Brazil dropped from $441 per MT to $323 per MT. 48 Imports of carbon semifinished steel experienced a similar pricing decline. Because 104 Global Steel Trade: Structural Problems and Future Solutions
they were able to cut their prices, Brazilian producers could increase their export volumes to the United States of hot- and cold-rolled steel and maintain their overall export volumes to the U.S. market in spite of the flood of low-priced imports from Japan and Russia. 1.5% 43.7% 9.9% 44.8% 14.1% 21.2% 1997 1998 1999 7.9% 6.9% U.S. Dumping Cases Asia Europe United States Faced with increases of lowpriced imports of carbon hotand cold-rolled steel from Brazil, as well as from Japan Latin America Source: World Trade Atlas. Other and Russia, the U.S. steel 3-43. Brazil—Distribution of Cold-Rolled Steel Exports (1997–1999) industry filed antidumping cases in 1998 against Brazilian steel exporters of these products. Given the 70 330 320 history of high steel prices in 60 Avg. Unit Price Brazil’s domestic market, 310 dumping allegations were not 50 300 the result of any new 40 290 situation (see box, next page). 49 But the Brazilian 30 280 price drops in 1998, as 270 imports flooded the U.S. 20 260 market, amplified the 10 potential for injury to U.S. Quantity Imported 250 producers. 0 240 Nov Jan '98 Mar May Jul Sept Nov • In light of the differentials between Brazilian domestic prices and U.S. export prices, the Source: ITC Dataweb. 3-44. U.S. Steel Mill Imports: Carbon Hot-Rolled Steel from Brazil Department of Commerce found Brazil to be dumping hot-rolled steel at rates ranging from 41.27 percent to 43.40 percent. 50 In July 1999, the United States suspended its dumping (and subsidy) investigations of Brazilian hot-rolled steel and put in place an agreement by Brazilian hot-rolled producers to adhere to established reference prices and a quota of 295,000 MT per year. 51 Pursuant to this agreement, Brazilian producers agreed not to sell hot-rolled steel for delivery to the United States at prices less than reference prices for each product category that ranged from $327 per MT to $390.35 per MT. 52 • With regard to carbon quality cold-rolled steel, the Commerce Department found that Brazilian producers dumped at rates ranging from 46.68 percent to 63.32 percent, although the ITC ultimately found that dumped cold-rolled steel did not injure U.S. steel companies. Metric Tons (thousands) 0.2% 1.0% 32.5% 5.8% 1.8% 58.9% 49.9% Dollars Chapter 3: Behind the Crisis—Brazil 105
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Preface This report is the product
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Contents Preface ..................
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CHAPTER 1 Overview Introduction Ove
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steel prices and still make money (
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History of Steel Trade Friction The
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• Led by “mini-mill” companie
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New Players in the Global Steel Mar
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CHAPTER 2 The U.S. Steel Import Cri
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The Steel Workers’ Perspective on
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1997: A Cloud Behind Every Silver L
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These productivity increases and sh
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In mid-1998, financial crisis hit R
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concerns regarding purchase allocat
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percent from Korea, and 59 percent
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from Brazil, Japan, and Russia. 58
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finished steel prices is very compl
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Department of Commerce determined t
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The Role of Trading Companies Tradi
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Trading companies viewed these atyp
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Weirton, W.V.: A Community Unites i
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CHAPTER 3 Behind the Crisis Introdu
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Competition has been restrained by
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When the Asian economic crisis sapp
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The Russian steel industry has made
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steel is traded between the world
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estructuring of companies and predi
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Under the conditions of introducing
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When prices began to escalate after
Page 59 and 60: pension payments) reached almost 20
Page 61 and 62: exports extremely profitable, the b
Page 63 and 64: Trading Companies and the Marketing
Page 65 and 66: these intermediaries, one source es
Page 67 and 68: • Domestic demand for hotrolled s
Page 69 and 70: Although the production facilities
Page 71 and 72: 3.2 Structural Factors and Japanese
Page 73 and 74: apparent in the marked differences
Page 75 and 76: High Domestic Prices The apparent c
Page 77 and 78: outstripped growth in domestic dema
Page 79 and 80: Noncompetitive Domestic Market and
Page 81 and 82: Professor Tilton’s price analysis
Page 83 and 84: The Product Certification System Ad
Page 85 and 86: Three factors contributed to tippin
Page 87 and 88: Collapse of Asian Export Markets At
Page 89 and 90: at a loss. The rationale for pricin
Page 91 and 92: 3.3 Korea’s Steel Industry in The
Page 93 and 94: negotiations for the purchase of Ha
Page 95 and 96: almost 700 percent (Chart 3-31). By
Page 97 and 98: of 1997 and 1998, when capacity uti
Page 99 and 100: • Regulating POSCO after privatiz
Page 101 and 102: approximately 32 percent from 1997
Page 103 and 104: denominated revenue. For other mini
Page 105 and 106: Rounding Out the Big Three Usiminas
Page 107 and 108: Chapter 3: Behind the Crisis—Braz
Page 109: Import Licensing System Importers m
Page 113 and 114: CHAPTER 4 U.S. Response to the Cris
Page 115 and 116: compared to November 1998 and conti
Page 117 and 118: downstream products. The U.S. indus
Page 119 and 120: for by the WTO. The industry argues
Page 121 and 122: Effect of Excess Inventories Much o
Page 123 and 124: coke but also to the large increase
Page 125 and 126: The Role of the Chinese Coke Indust
Page 127 and 128: CHAPTER 5 Reforms and Restructuring
Page 129 and 130: The current dramatic economic and s
Page 131 and 132: While this analysis is largely corr
Page 133 and 134: these four heavyweights will be abl
Page 135 and 136: Government Initiatives to Encourage
Page 137 and 138: U.S. Firm Takes Over Hanbo Steel Pr
Page 139 and 140: ensure that the commercial banks fo
Page 141 and 142: Again, while these efforts hold pro
Page 143 and 144: Brazil-IMF Reform Program Throughou
Page 145 and 146: CHAPTER 6 New Players in the Global
Page 147 and 148: • Be subject to strong subsidy di
Page 149 and 150: Technological Backwardness. China
Page 151 and 152: 100 kg at present. Per capita consu
Page 153 and 154: Current Reform Efforts in the State
Page 155 and 156: wire rod production with an annual
Page 157 and 158: Notwithstanding the negative impact
Page 159 and 160: Media reports and interviews with v
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Baoshan is not equipped to provide
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Domestic Consumption In 1998, Ukrai
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two firms, Enakievo and Konstantino
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• Barter. Ukrainian steel compani
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Today India is the world’s tenth
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among steel-intensive sectors, such
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Banks’ Debt and Equity Exposure D
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Tariffs. High tariff rates also con
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new sales growth. 196 By 1998, even
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CHAPTER 7 Avoiding Future Crises In
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propose to monitor additional data
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determination of dumping. In Octobe
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Engaging Korea On Hanbo In late 199
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Korea Korea’s steel industry has
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New Players: China, Ukraine, and In
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government and private sector assis
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Notes Chapter 1 1. Difference of av
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massive layoff data shows 9,550 emp
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also possess weaknesses, which the
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64. Ibid., 145-177. 65. Id. Bethleh
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ITC considered numerous factors. On
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104. Harry Thuedaus was recently re
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Frank Markus, Successes and Failure
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Decrepit Steel Plant in the Urals,
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2. WTO. At the time of this report,
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Among those who have written on thi
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line pipe markets, the European and
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97. Merrill Lynch, “Steel Industr
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chaebol to downside risk. This crea
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provided after 1991 by domestic ban
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61. Catholic University of Korea Pr
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acquired on economically viable ter
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date of publication in printed vers
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Producers of iron ore and coke, the
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production may be shut down by the
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56. U.S. government sources. 57.
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79. World Bank-Korea, 12. 80. Seong
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24. 24. “Hard Times for China’s
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60. “PRC To Further Cut Steel Out
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132. In terms of crude steel produc
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195. The capacity of the new steel
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