Global Steel Trade; Structural Problems and Future Solutions

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In recent years, the Steel Committee has expanded its membership and recruited additional observers such as Russia, Ukraine, and India; held special seminars on restructuring and assistance to countries of the former Soviet Union and on nonmember steel industries; agreed to hold a special seminar on China’s steel industry available to all interested parties and a seminar on steel distribution and the role of e-commerce; initiated member and observer surveys of trade barriers, subsidies and other measures affecting steel trade; and, initiated a new industry-based and funded data collection effort. These efforts need to be reinforced through high level participation, and a more results-oriented structure and process. We recommend injecting the following elements into the existing OECD Steel Committee to render it more effective. Increase the Level of Participation in OECD Steel Committee Meetings The OECD Steel Committee now meets twice a year. The meetings are comprised of career, mid-level government officials frequently accompanied by steel mill and union representatives. In order to bring policy weight to the discussions and to make them more results-oriented, the committee should be attended by representatives from each government who are of a higher rank and can speak definitively on behalf of their governments on steel matters. Quality, Relevance, and Timeliness of OECD Steel Data The Steel Committee needs to gather relevant steel market information in a more timely fashion and focus itself on more current events and trends. The current statistical program of the committee should be improved and expanded to collect data that is significantly more timely and relevant. All participating countries should increase the frequency and relevance of steel data collection and evaluation. As a first step, every member and observer country should survey market indicators relevant to steel and itemize which are available on a weekly, monthly and quarterly basis. The United States and Canada have each devised their own approaches to improving the timeliness of steel import data. Each member country should explore the method which best suits its collection system. These data must be fashioned into a coherent, timely and relevant body of information subject to serious discussion by the senior delegations subsequent to commentary and analysis by a panel of private sector experts and the committee secretariat. 3 Assistance should be provided to members or observers, as needed, to improve data quality and timeliness. These government analyses should be supplemented by industry-produced reports for the steel industry as a whole and by appropriate product category, as was agreed in broad principle in Paris at the May 2000 OECD Steel Committee meeting. Work on the essential details of such industry-produced reports is ongoing, and the United States must continue to ensure that potential antitrust concerns be met by avoiding, inter alia, the creation of short-term market forecasts. Reinvigorated Agenda for the OECD Steel Committee Committee meetings need to be more results-oriented and relevant to current global steel issues. Working groups should be established on specific issues. Low priority programs should be eliminated to free up resources for new initiatives. The United States will request that the OECD Steel Committee place a particular emphasis on the following items on its agenda. • Market reforms of the steel industries in Russia and Ukraine. Building upon the seminar conducted by the committee in November 1999, concrete initiatives should be developed to coordinate multilateral 184 Global Steel Trade: Structural Problems and Future Solutions
government and private sector assistance to implement market reforms of the steel industry in Russia and Ukraine. The Committee should convene a meeting of experts from member states and international organizations to discuss how broader assistance programs can be focused on the market reforms of the steel industry in Russia and Ukraine. • Elimination of formal and informal import barriers to steel. Despite substantial strides in reducing barriers to imports, there continue to be significant barriers remaining, including market sharing arrangements among companies, high tariffs and import fees, and nontransparent certification and import requirements. The Committee should analyze these barriers as they pertain to steel trade and make specific recommendations to members regarding their findings. • Examination of the role of trading companies and steel distributors in global steel trade. The OECD should conduct a study and establish a dialogue at the committee’s meetings to increase the understanding of steel distribution and trading in OECD and non-OECD countries. The topics could include (1) the role of trading companies, (2) the role of service centers in key markets, and (3) the difference between traders that hold inventory and those that do not. In addition, the United States will request that the OECD Steel Committee place the following item on its agenda. Examination of Official Export Credit Financing for Steel Projects and the Impact on Steel Overcapacity Although official export credit support for steel projects has declined in recent years, such financing can contribute to global overcapacity. Accordingly, the United States will ask that the Steel Committee review the impact of official export credit financing on steel overcapacity and consider whether a request should be made to the OECD Working Party on Export Credits and Credit Guarantees that it limit official export credit support for projects that substantially increase global steel capacity. Restrict Government and Multilateral Development Bank Lending on Expanded Steel Capacity The President’s 1999 Steel Action Program set forth a commitment to oppose international financial institution lending that increases subsidized steel production. We continue to be concerned about government intervention and support for the creation of additional steelmaking capacity around the world despite the mature condition of the global steel industry. Such programs contribute to the expansion of economically unjustifiable global steel capacity. To address these concerns, we recommend the following actions to restrict government and multilateral development bank financing for projects which substantially increase global steel capacity. Seek a Moratorium on Multilateral Development Bank Lending that Substantially Increases Overseas Steel Production The U.S. government will seek a moratorium on lending by the multilateral development banks for projects that substantially increase steel production capacity overseas. Exceptions to this policy may be made in the case of projects in the least developed countries (as determined by International Development Associationonly eligibility in the World Bank). 4 In implementing this moratorium, we will take into account the U.S. policy of encouraging privatization of state-owned steel mills, provided that no government subsidies are involved in the privatization. Chapter 7: Avoiding Future Crises 185
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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
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pension payments) reached almost 20
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exports extremely profitable, the b
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Trading Companies and the Marketing
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these intermediaries, one source es
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• Domestic demand for hotrolled s
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Although the production facilities
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3.2 Structural Factors and Japanese
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apparent in the marked differences
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High Domestic Prices The apparent c
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outstripped growth in domestic dema
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Noncompetitive Domestic Market and
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Professor Tilton’s price analysis
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The Product Certification System Ad
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Three factors contributed to tippin
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Collapse of Asian Export Markets At
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at a loss. The rationale for pricin
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3.3 Korea’s Steel Industry in The
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negotiations for the purchase of Ha
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almost 700 percent (Chart 3-31). By
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of 1997 and 1998, when capacity uti
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• Regulating POSCO after privatiz
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approximately 32 percent from 1997
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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
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CHAPTER 5 Reforms and Restructuring
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The current dramatic economic and s
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While this analysis is largely corr
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these four heavyweights will be abl
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Government Initiatives to Encourage
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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
Page 161 and 162: Baoshan is not equipped to provide
Page 163 and 164: Domestic Consumption In 1998, Ukrai
Page 165 and 166: two firms, Enakievo and Konstantino
Page 167 and 168: • Barter. Ukrainian steel compani
Page 169 and 170: Today India is the world’s tenth
Page 171 and 172: among steel-intensive sectors, such
Page 173 and 174: Banks’ Debt and Equity Exposure D
Page 175 and 176: Tariffs. High tariff rates also con
Page 177 and 178: new sales growth. 196 By 1998, even
Page 179 and 180: CHAPTER 7 Avoiding Future Crises In
Page 181 and 182: propose to monitor additional data
Page 183 and 184: determination of dumping. In Octobe
Page 185 and 186: Engaging Korea On Hanbo In late 199
Page 187 and 188: Korea Korea’s steel industry has
Page 189: New Players: China, Ukraine, and In
Page 193 and 194: Notes Chapter 1 1. Difference of av
Page 195 and 196: massive layoff data shows 9,550 emp
Page 197 and 198: also possess weaknesses, which the
Page 199 and 200: 64. Ibid., 145-177. 65. Id. Bethleh
Page 201 and 202: ITC considered numerous factors. On
Page 203 and 204: 104. Harry Thuedaus was recently re
Page 205 and 206: Frank Markus, Successes and Failure
Page 207 and 208: Decrepit Steel Plant in the Urals,
Page 209 and 210: 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
Page 219 and 220: 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
Page 229 and 230: production may be shut down by the
Page 231 and 232: 56. U.S. government sources. 57.
Page 233 and 234: 79. World Bank-Korea, 12. 80. Seong
Page 235 and 236: 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
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195. The capacity of the new steel
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