Global Steel Trade; Structural Problems and Future Solutions

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Electric,” Metal Bulletin, May 4, 2000, accessed on May 5, 2000. “Mittal Outlines Plans for EAFs at Inland,” Metal Bulletin, May 22, 2000, accessed on June 6, 2000. 32. Primarily located in northern Minnesota and Michigan, the iron ore industry in the United States processes mined iron ore into taconite pellets which are used in blast furnaces to make steel. Commercially accessible iron ore in the United States does not have sufficient iron content to be directly consumed as ore in a blast furnace and is converted into taconite pellets. The pelletizing process increases the iron content and also improves the efficiency of the blast furnace by providing a uniform product. 33. Discussions between Department of Commerce officials and representatives of the iron ore industry in Hibbing, Minnesota, October 1999. 34. Average import values from ITC Trade Dataweb. 35. Based on data submitted by the Iron Mining Association of Minnesota. 36. Based on the published 1999 world price of 46.46 cents per iron unit and the tested iron content of CVRD pellets of 62.8 percent iron units (46.46 * 62.8 = $29.18). Submitted by the Iron Mining Association of Minnesota to the Department of Commerce. 37. According to the iron ore industry, the price of slabs typically moves in synch with the price of hot-rolled steel, reflecting, in part, the additional cost of transforming the slab into hot-rolled sheet (approximately $44 per metric ton based on costs incurred by the five largest U.S. integrated steel producers). In 1997 and 1998, even as prices in hot-rolled steel fluctuated, the gap between the average import price of hot-rolled sheet from all countries and slab from Brazil held steady. Slab prices in both 1997 and 1998 were roughly 80 percent of hot-rolled sheet but dropped to 68 percent in 1999. In the eyes of the industry, the increasing gap between slab and hot-rolled prices is a sign that dumping is taking place. Submitted by the Iron Mining Association of Minnesota to the Department of Commerce. 38. Average import values from ITC Trade Dataweb. 39. Prior to its partial privatization in 1997, CVRD purchased significant shares of Brazil’s major steel producers, including 23 percent of CST, Brazil’s biggest slab producer. (As of September 2, 1999, CVRD owned: 10 percent of CSN; 23 percent of Usiminas; 22.5 percent of CST; and 2.3 percent of Acominas.) CMA-Brazil. The cross-ownership between Brazil’s largest iron ore and slab producers and the continued significant presence of the government in the ownership of CVRD, presents both companies with the opportunity to coordinate their efforts in the home market and abroad, and provides them with the potential for government assistance in the sector. 40. CVRD, in conjunction with BHP of Australia, agreed to take over two Brazilian iron ore companies, Samitri and Samarco. If approved by Brazil’s antitrust authorities, the takeover will boost CVRD’s iron ore mining and pelletizing capacity by about 30 million MT, giving it an estimated 50 to 60 percent share in the world iron ore pellet market. See “CVRD and BHP link up to buy Samitri-Samarco,” Metal Bulletin News, June 1, 2000, accessed on June 6, 2000. 41. The industry filed a countervailing duty case against iron ore from Brazil in 1986. The ITC found that the industry was not injured as a result of these imports. 42. “Investing, Licensing & Trading Brazil, January 1999,” The Economist Intelligence Unit,13–18, accessed on May 9, 2000. 43. Until January 2000, furnace and foundry coke were classified under a single HTS number. The ITC is currently conducting a section 332 investigation on foundry coke and, as part of that investigation, will be trying to identify foundry coke imports for 1997, 1998, and 1999. 44. “The Coke Crisis?” paper presented at the 1998 Intertech Conference on the Coke Industry (March 4–6, 1998), accessed from the Internet on May 25, 2000. 45. Tian-Rui Li, Chairman of Shanxi Provincial Government and Economic Trade Commission, “Trend of Coking Industry in Shanxi, China,” a paper presented at Coke Outlook ‘99 (New Orleans, La, February 3–5, 1999), 6. 46. Ibid., 7. 47. Ibid., 7 and chart 3. 48. “The Coke Crisis?,” paper presented at the 1998 Intertech Conference on the Coke Industry, (March 4–6, 1998), accessed on May 25, 2000. 49. Tian-Rui Li, Chairman of Shanxi Provincial Government and Economic Trade Commission, “From 1988 to 1997, China’s coke exports increased ten times …” as reported in “Testimony submitted by the American Coke and Coal Institute” as part of the Section 332 Foundry Coke Study (February 25, 2000). 50. ITC Trade Dataweb. 51. 48 percent of total Chinese coke production and 85 percent of the coke produced in Shanxi, China’s primary cokemaking province, is produced in beehive ovens. If implemented and enforced, new environmental regulations in China may eliminate a significant amount of beehive coke production. An estimated 80 percent of current beehive 222 Global Steel Trade: Structural Problems and Future Solutions
production may be shut down by the end of 2000 because of failure to comply with the new environmental standards. See Tian-Rui Li, Chairman of Shanxi Provincial Government and Economic Trade Commission, “Trend of Coking Industry in Shanxi, China,” a paper presented at Coke Outlook ‘99 ( New Orleans, La, February 3–5, 1999), 7–8. 52. Mr. Yan Suling, Deputy General Manager of the 5th Department, China National Coal Industry Import and Export Commission as reported in “Testimony submitted by the American Coke and Coal Institute” as part of the Section 332 Foundry Coke Study, (February 25, 2000). Chapter 5 1. Ministry of Economy of the Russian Federation, The Development Strategy of the Russian Iron and Steel Industry until 2005 (Moscow, September 1999), translated from Russian. 2. Economist Intelligence Unit, Country Report: Russia, March 1, 2000, 28; Country Report: Russia, May 17, 2000. 3. “Putin Says Economy Soft, Growth Fragile,” The Moscow Times, July 11, 2000. 4. Cable from U.S. Embassy in Moscow, June 13, 2000, #12425. 5. Id. 6. Economist Intelligence Unit, Country Report: Russia, March 1, 2000, 30. 7. U.S. Embassy cable, June 13, 2000, #12425. 8. “Russian Economic Barometer,” The New Generation, November 1999. Available from http://www.newgen.org; Internet, accessed January 2000. 9. Cable from U.S. Embassy in Moscow, June 13, 2000, #12425. 10. Vice President of Research Caius Rapanu, and Equity Analyst Research, Renaissance Capital Svetlana Smirnova, interviews by Department of Commerce officials, November 9, 1999, Moscow. 11. Metal Bulletin Research Ltd. and InfoMine, A Profile of the Steel Industry in the CIS (December 1997), 2. [Hereinafter Metal Bulletin Research Ltd. and InfoMine-CIS] 12. Cable from U.S. Embassy in Moscow, June 13, 2000, #12425. 13. Ministry of Economy, Development Strategy until 2005, 4. 14. Director of the Department of Metallurgy within the Ministry of Economy of the Russian Federation Leonid Shevelev, interview by Department of Commerce officials, December 14, 1999, Moscow; President of Russia Union of Metal Exporters S. Z. Afonin, interview by Department of Commerce officials, December 14, 1999, Moscow. 15. InfoMine Research Group, Market Analysis Research of the Russian Steel Industry, prepared for the U.S. Department of Commerce (Moscow, January 2000), 25. [Hereinafter Infomine-Russia] 16. Vladimir Putin, “Russia at the Turn of the Millennium,” 3, official Web site of the government of the Russian Federation. 17. Putin, 11. 18. “Russian Prime Minister Says Tax Reform Needed to Boost Growth,” Russia Today, May 25, 2000; “Russia’s Kasyanov Calls for Energetic Reforms,” Russia Today, May 17, 2000, available from available from http:// www.russiatoday.com; Internet. 19. “Russia’s Kasyanov Calls for Energetic Reforms,” Russia Today, May 25, 2000. 20. Putin, 12. 21. Ministry of Economy, Development Strategy until 2005, 2. 22. “NTMK moves closer to plate mill contract,” Metals Bulletin, April 25, 2000; “Russian pipe venture takes shape,” Metals Bulletin, June 21, 2000; “NTMK gets government support for Mill-5000,” Metals Bulletin, March 8, 2000. 23. Ministry of Economy, Development Strategy until 2005, 5. 24. Id. 25. Clifford G. Gaddy and Barry W. Ickes, “Getting Realistic About Russia: No Time for Illusions,” Brookings Review (Winter 1999), 47. 26. “Final U.S. Antidumping Determination on Hot-Rolled Plate: Prelude to Weeding out in Steel Industry,” Nikkei Sangyo Shimbun, June 13, 1999. 27. Japan Iron and Steel Federation statistics. Average monthly shipments to U.S., 1990–97: 221 thousand MT. Average monthly shipments, Jan– Oct 1999: 245 thousands MT. 28. Id. 29. “Exports Change Crude Steel Output Share Among Major Makers,” Nikkei Weekly, October 26, 1999. 30. “Nissan Narrows Steel Suppliers to 3,” Nihon Keizai Shimbun, January 28, 2000. Note that these changes in steel purchasing by major automotive customers were also discussed by industry sources in interviews for this report. Notes 223
Page 3 and 4:
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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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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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 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: Producers of iron ore and coke, 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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