Global Steel Trade; Structural Problems and Future Solutions

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35. Lincoln (1998), 208–210. 36. Merrill Lynch, “Japanese Steel Industry, Consolidate Facilities or Risk Putting Crude Steel Share in Flux,” Japan Steel In-depth Report (December 1998), 7. 37. Morgan Stanley, Japan Steel: January Supply-Demand and Price Trends (February 3, 2000), Appendix 10. 38. See e.g., U.S. Department of Commerce, International Trade Administration, Notice of Final Determination of Sales at Less Than Fair Value: Hot-Rolled Flat-Rolled Carbon-Quality Steel Products From Japan, 64 Federal Register 24329 (May 6, 1999). Although the actual pricing and cost information submitted in those cases cannot be analyzed for purposes of this report because it is proprietary information within the meaning of Section 777 of the Tariff Act of 1930, as amended, the overall weighted-average dumping margins are provided in these public notices. 39. Tilton, (1998), 5–6. States that the big buyer price governs approximately 60 percent of integrated producers’ sales, and contrasting it with the U.S. list price, which is generally discounted in setting actual prices. See also Katz, 183. Stating that 80 percent of all steel sold to Japanese manufacturers is sold at the big buyer price. 40. Peter F. Marcus and Sheryl Iwanski, World Steel Dynamics, Price Track 64 (February 2000), 45. 41. Tilton (1998), 5. 42. See Letter to Department of Commerce from William Barringer, Willkie Farr & Gallagher, representing the Japanese integrated producers, April 11, 2000 (“Debunking the Myth of Japanese Steel Cartels”), 1–2. 43. Meeting with representatives of Japanese integrated producers, June 7, 2000. 44. Id. 45. Tilton (1998), 6. 46. Tilton, 6, for import penetration levels in various countries as of 1996, listing U.S. import penetration at 25 percent, Korea at 30 percent, and various EU countries at over 40 percent. Tilton states that the high EU import penetration rates reflect “their geographical proximity to one another and high levels of trade openness.” 47. JISF, Monthly Report on the Iron & Steel Statistics, March 1998. Both imports and apparent consumption calculated on a crude steel equivalency basis, for consistent comparison. See also Peter F. Marcus and Karlis M. Kirsis, World Steel Dynamics, Core Report NNN (January 2000), 3–24, 3–25. 48. Id. 49. Id. 50. See Metal Bulletin Monthly, September 1986. See also Japan Economic Journal, March 16, 1991. 51. Letter to Department of Commerce from William Barringer, Willkie Farr & Gallagher, representing the Japanese integrated producers, April 11, 2000 (“Debunking the Myth of Japanese Steel Cartels”), 3. “the absurdity” of the “contention that Japanese steel companies could coerce customers many times their size into paying extortionate sums for steel by threatening to withhold business.” 52. Tilton (1998), 6. 53. Ibid., 6, 9. 54. Ibid., 10. 55. Ibid., 10–11. 56. Id. 57. Ibid., 10–12. 58. Ibid., 10. 59. Ibid., 11. 60. Standards and certification systems often have significant adverse effects on international trade and can amount to an effective trade barrier, particularly when these standards differ between trading countries. For this reason, the General Agreement on Tariffs and Trade has, since the 1979 Tokyo Round, included an Agreement on Technical Barriers to Trade. This agreement requires harmonization of technical regulations and standards, and nondiscrimination against foreign parties. Today, the JIS. standards for steel are generally considered to be harmonized with American Society for Testing and Materials (ASTM) standards. 61. Summary of telephone conversations with Steel Team Analyst and a U.S. company official that had sought JIS certification. 62. Letter to Department of Commerce from William Barringer, Willkie Farr & Gallagher, representing the Japanese integrated producers, April 11, 2000 (“Debunking the Myth of Japanese Steel Cartels”); Statement made by representative of the Government of Japan at the director level session of the U.S.–Japan Steel Dialogue, March 16 and 17, 2000, Tokyo, Japan. 63. “Major Japanese Companies Seek New Competition Rules,” Nihon Keizai Shimbun, December 10, 1999. See press release, “Commission fines cartel of seamless steel tube producers for market sharing,” Brussels, December 8, 1999, available from http://europa.eu.int; Internet: “To coordinate their behaviour on the standard OCTG and project 206 Global Steel Trade: Structural Problems and Future Solutions
line pipe markets, the European and Japanese producers set up a cartel, which they called the ‘Europe Japan club.’ The cartel restricted competition in the common market by requiring that the domestic markets of the different producers (i.e., the German, French, Italian, UK, and Japanese markets) should be respected.” 64. Source: Information provided to Commerce Department by U.S. steel producers. 65. Id. 66. Id. 67. Id. 68. Korea’s exports of finished steel to the EU increased by 2187 percent from 1997 to 1998. This was an increase of 1,549,045 tons. World Trade Atlas: Korea CD–ROM (June 1999). 69. Interview with Masanari Iketani, November 1999. 70. Merrill Lynch, “Steel Industry, Moving Toward Realignment of Production Facilities, Steel Mills and Companies,” Japan Steel In-depth Report, (June 3, 1998), 4. 71. Korea-Japan import levels, and the alleged market arrangement, were referenced by industry officials and academics in interviews both in the U.S. and Japan. 72. All data on Gross Domestic Product, including components, calculated from statistics compiled by Japan’s Economic Planning Agency available from http://www.epa.go.jp/e-e/menu.html; Internet (Note all figures are for the calendar year and are rounded.) Japanese real GDP in 1998 was ¥480.6 trillion, down 2.5 percent from ¥493.0 trillion in 1997. Real GDP (annualized rate) in 1Q97 was ¥499.2 trillion versus ¥475.6 trillion in 4Q98, a difference of 4.7 percent. 73. Supporting endnotes for this text box: See MITI, Interim Report of the Forum on Structural Problems Related to the Basic Materials Industries (June 1999) , Introduction, Section 2.3. See also Peter F. Marcus and Karlis M. Kirsis, World Steel Dynamics, Core Report NNN (January 2000), 3–25. Based on apparent consumption. See also Japan Iron and Steel Federation (JISF), Monthly Report of the Iron and Steel Statistics, (Tokyo, December 1999), Vol.42. No.12. (Ordinary steel sales to the construction sector fell from 18.5 million tons in 1990 to 12.9 million tons in 1998. Ordinary steel sales to the automobile sector fell from 12.2 million tons in 1990 to 8.3 million tons in 1998.) See also Katz, 197–198. “Japan’s cartelized economy is so distorted that it suffers from a kind of ‘economic anorexia.’ In other words, private domestic demand is chronically too deficient to consume all that Japan produces.”; “Protection of steel required protection of autos and machinery. Protection of cement required protection of construction. All these layers of protection padded profits up and down the line. They also made consumer prices so high that consumers simply could not afford to pay them all; they consumed less..” Ibid., 210. See also MITI Interim Report, Chapter 1, Section 1.1 See also MITI Interim Report, Chapter 1, Section 1.3. See also, “Nippon Steel’s Blast Furnace Capability Will Increase by 10 Percent,” Nihon Keizai Shimbun, April 16, 1999, “Currently, demand for crude steel is as low as the level 30 years ago and it is considered that 20 million tons of production capacity is excess against Japanese domestic crude steel production capacity (assumed as slightly less than 120 million tons).” See lso, Greg Mastel and Andrew Szamosszegi, Economic Strategy Institute, Leveling the playing Field: Antidumping and the U.S. Steel Industry (Washington D.C., February 1999) Lists Japanese ‘excess steel production’ in the 20–25 million ton range for 1996–99 (citing OECD Steel Committee, 1998). See also, Peter F. Marcus and Michael A. Organek, World Steel Dynamics, Price Track 62, (June 28, 1999), 8. Regarding historic industry-wide capacity figures including the 140 million ton capacity figures for the early 1980s, see the following World Steel Dynamics Core Reports. All figures effective capacity. 1960-1996: Peter F. Marcus and Karlis M. Kirsis, World Steel Dynamics, Core Report III, (October, 1998), 2-34; 1997-1999: Peter F. Marcus and Karlis M. Kirsis, World Steel Dynamics, Core Report MMM, (September, 1999), 1-6, 2-2. Regarding the capacity build-up period and the government’s role in fostering steelmaking capacity during this time, see Patricia O’Brien, Harvard Business School Case Study, The Development of the Japanese Steel Industry, (Boston, 1987). Regarding the overcapacity that has characterized steel and other basic materials industries since the early 1970s, see Katz, 168. Long-term overcapacity in the Japanese steel industry through the late 1990s was also routinely acknowledged by steel experts in interviews for this report. 74. In 1996, Japan’s real GDP was ¥485.2 trillion, an increase of nearly 5.1 percent from ¥461.9 trillion in 1995. Public demand dropped nearly ¥4 trillion between 1996 and 1997, or more than 0.8 percent of real GDP in 1997. Between the 2Q97 and 4Q98, Japanese exports fell from almost ¥68.1 trillion to ¥64.3 trillion, a difference of 5.6 percent. Data calculated from statistics compiled by Japan’s Economic Planning Agency available from http:// www.epa.go.jp/e-e/menu.html; Internet . 75. The collapse of Hokkaido-Takushoku Bank (Takugin) in November 1997 marked the first time any major city bank had failed in the past 50 years. Within the same month, Yamaichi Securities, one of Japan’s Big Four brokerages, Notes 207
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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
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ensure that the commercial banks fo
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Again, while these efforts hold pro
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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
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Notwithstanding the negative impact
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Media reports and interviews with v
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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
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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 and 190: New Players: China, Ukraine, and In
Page 191 and 192: government and private sector assis
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: Among those who have written on thi
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
Page 241: 195. The capacity of the new steel
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