Global Steel Trade; Structural Problems and Future Solutions

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Economic Cooperation and Development Steel Committee. Where our concerns are not resolved through bilateral and multilateral discussions, the United States government will determine whether additional action is warranted. Commerce’s Subsidies Enforcement Office will enhance its efforts to determine whether any foreign activities constitute actionable subsidies under the WTO Subsidies Agreement. This initiative will also include new players like China, Ukraine, and India. • Reinvigorating the international steel policy agenda. The Administration will take steps to make the OECD Steel Committee a better forum for real progress, including increasing the level of participation in OECD Steel Committee meetings and reinvigorating its agenda. The Administration will seek a moratorium on multilateral development bank lending that substantially increases steel production. By taking meaningful steps to deal with structural problems now, the United States and its trading partners can help to avoid the cycle of import surges and trade actions that have characterized steel trade for the past thirty years. These efforts will also benefit the global steel market and the economies of the countries involved by ensuring open and fair markets that will lead to increased competitiveness and productivity. 10 Global Steel Trade: Structural Problems and Future Solutions
CHAPTER 2 The U.S. Steel Import Crisis Introduction The U.S. steel crisis of 1998 began to take hold in the middle of the year and then came on quickly. In the last six months of the year, import penetration reached record levels, domestic shipments fell 11 percent and capacity utilization rates dropped dramatically (Charts 2-1, 2-2). 1 The speed and severity of the crisis, and the abrupt deterioration of the U.S. industry’s fortunes, caused steel companies and workers to fear that they might soon be facing one of the worst crises to hit the industry in recent years. Imports were killing us. All of a sudden, we went from three shifts down to two—you knew what was coming. Each day I’d look and see my order sheets dropping. Then you start looking to see if your name’s on the list, asking you to report to the front office. One day it’s up there, and your job is gone. Harry Thuedaus, steel worker at Acme Steel, laid off after seven years with Acme The rapid growth in imports coupled with the drop in prices hit many U.S. steel companies hard. During the second half of 1998, a number of U.S. companies saw their sales drop sharply. • North Star BHP’s order books dropped from 227,000 metric tons (MT) to less than 55,000 MT in a period of less than six weeks. 2 • In September 1998, Wheeling-Pittsburgh saw 143,000 MT vanish from its order books in a ten-day period. 3 • From November 1998 to February 1999, Northwestern Steel’s business fell off by 40 percent. According to Fred Rocchio, president and CEO, the impact of the import surge became evident in late 1998 when 35% 30% 25% 20% 15% Jan ’98 Mar ’98 May ’98 July ’98 Sept ’98 Nov ’98 Source: American Iron and Steel Institute. 2-1. Import Penetration: Finished Steel Chapter 2: The U.S. Steel Import Crisis 11
Page 3 and 4: Preface This report is the product
Page 5 and 6: Contents Preface ..................
Page 7 and 8: CHAPTER 1 Overview Introduction Ove
Page 9 and 10: steel prices and still make money (
Page 11 and 12: History of Steel Trade Friction The
Page 13 and 14: • Led by “mini-mill” companie
Page 15: New Players in the Global Steel Mar
Page 19 and 20: The Steel Workers’ Perspective on
Page 21 and 22: 1997: A Cloud Behind Every Silver L
Page 23 and 24: These productivity increases and sh
Page 25 and 26: In mid-1998, financial crisis hit R
Page 27 and 28: concerns regarding purchase allocat
Page 29 and 30: percent from Korea, and 59 percent
Page 31 and 32: from Brazil, Japan, and Russia. 58
Page 33 and 34: finished steel prices is very compl
Page 35 and 36: Department of Commerce determined t
Page 37 and 38: The Role of Trading Companies Tradi
Page 39 and 40: Trading companies viewed these atyp
Page 41 and 42: Weirton, W.V.: A Community Unites i
Page 43 and 44: CHAPTER 3 Behind the Crisis Introdu
Page 45 and 46: Competition has been restrained by
Page 47 and 48: When the Asian economic crisis sapp
Page 49 and 50: The Russian steel industry has made
Page 51 and 52: steel is traded between the world
Page 53 and 54: estructuring of companies and predi
Page 55 and 56: Under the conditions of introducing
Page 57 and 58: 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
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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
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• Regulating POSCO after privatiz
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approximately 32 percent from 1997
Page 103 and 104:
denominated revenue. For other mini
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Rounding Out the Big Three Usiminas
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Chapter 3: Behind the Crisis—Braz
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Import Licensing System Importers m
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they were able to cut their prices,
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CHAPTER 4 U.S. Response to the Cris
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compared to November 1998 and conti
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downstream products. The U.S. indus
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for by the WTO. The industry argues
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Effect of Excess Inventories Much o
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coke but also to the large increase
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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
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these four heavyweights will be abl
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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
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CHAPTER 6 New Players in the Global
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• Be subject to strong subsidy di
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Technological Backwardness. China
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100 kg at present. Per capita consu
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Current Reform Efforts in the State
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wire rod production with an annual
Page 157 and 158:
Notwithstanding the negative impact
Page 159 and 160:
Media reports and interviews with v
Page 161 and 162:
Baoshan is not equipped to provide
Page 163 and 164:
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,
Page 211 and 212:
Among those who have written on thi
Page 213 and 214:
line pipe markets, the European and
Page 215 and 216:
97. Merrill Lynch, “Steel Industr
Page 217 and 218:
chaebol to downside risk. This crea
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provided after 1991 by domestic ban
Page 221 and 222:
61. Catholic University of Korea Pr
Page 223 and 224:
acquired on economically viable ter
Page 225 and 226:
date of publication in printed vers
Page 227 and 228:
Producers of iron ore and coke, the
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production may be shut down by the
Page 231 and 232:
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
Page 237 and 238:
60. “PRC To Further Cut Steel Out
Page 239 and 240:
132. In terms of crude steel produc
Page 241:
195. The capacity of the new steel
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