Global Steel Trade; Structural Problems and Future Solutions

apparent in the marked differences in which steel is sold domestically and for export. These long-standing
structural problems exacerbated the steel crisis in 1998.
The question of whether major Japanese steel producers coordinate on production levels and other business
decisions is well known among steel industry observers. It has received increasing attention in recent years
with respect to its potential impact on steel trade, including the 1998 surge in exports to the United States.
A discussion of the issue is therefore warranted in the context of a report on structural issues facing the
global steel industry.
This report does not address the lawfulness of conduct of Japanese steel producers under existing U.S. or
Japanese law. Company-specific information such as intra-company memos or depositions of key officials
was not collected. Such an attempt would have been outside the authority of the Commerce Department
and beyond the scope of this report. Within these limitations, however, a substantial effort was made to
investigate claims of the existence and trade impact of alleged coordination among Japanese integrated
producers (see box). 11
In total, the information gathered for this report appears to indicate that a noncompetitive market among
major integrated producers in Japan has remained in place throughout the 1990s, and that it affected trade
flows during the past several years. The manner in which these firms are said to interact is commonly
referred to as a “cooperative system,” allegedly involving long-standing coordination on production shares
and other business decisions, with Nippon Steel serving as the industry leader.
A Look at the Data: Production Shares and Pricing
Stable Production Shares
Long-term production data support the views of industry experts regarding coordination among major
producers. Within the pool of crude steel production accounted for by the five major integrated firms, the
production share of each firm has remained virtually constant for twenty-five years, from the mid 1970s up
through the time of the export surge. In general, for each of these years, Nippon Steel has accounted for
Methods of Inquiry Into Alleged “Cooperative System”
The inquiry into allegations of coordination among major producers included:
1. A review of the relevant data available from public sources, including production shares, domestic
and export pricing, shipment volumes, and Japanese import levels.
2. A review of published materials in the United States and Japan, including monthly steel industry
reports by investment firms, literature by academics and journalists, and journal and press accounts.
3. Numerous interviews in Japan and the United States with industry experts, including academics,
government officials, investment firms, journalists, and U.S. importers. Within the Japanese steel
industry, a major industry association (the Kozai Club), as well as the leading mini-mill producer,
Tokyo Steel, were interviewed. The five major integrated producers declined interview requests.
The analysis of the primary data that might reflect any such coordination—long-term relative production
shares—was important, as were data relating to the market impact of alleged coordination, namely
pricing, shipment, and import data. Direct interviews with industry experts were also helpful. Finally, the
growing literature on the subject provided background on the historic and present-day context of alleged
coordination among major producers. Some of the secondary information on this issue is anecdotal in
nature. However, the sources are considered to be reliable and authoritative.
Chapter 3: Behind the Crisis—Japan 67