July 2007
Association News

Steel Pipe Case Filed Against China
Six U.S. producers of welded standard steel pipe and the United Steelworkers have filed petitions with the U.S. Department of Commerce and the U.S. International Trade Commission alleging that China is dumping subsidized imports of welded standard pipe into the United States. The industry seeks to have the agencies impose duties to offset Chinese government subsidization and dumping.

According to the petitioners, Chinese imports of circular standard and structural pipe have increased from 10,000 tons in 2002 to 690,000 tons in 2006, a 6,800 percent increase. Since the unfair trade began, four U.S. plants (out of 35) have ceased production and over 500 employees have lost their jobs. The surge continued, with a 21 percent rise in imports in the first quarter of 2007. Imports of standard pipe from China represent over 60 percent of total U.S. imports of such products.

The petitioners in this case are: Allied Tube & Conduit, IPSCO Tubulars Inc., Northwest Pipe Co., Sharon Tube Co., Western Tube & Conduit Corp. and Wheatland Tube Co., as well as the United Steelworkers.

“For the past 15 months, we have been working hard to bring more consolidation to the pipe and tube industry in the United States and to further improve its worldwide competitiveness,” says Armand Lauzon, CEO of John Maneely Co., parent company of Wheatland Tube and Sharon Tube. “Unfortunately, in May 2006, we were forced to close our second largest production facility located in Sharon, Pa., with the loss of several hundred jobs because of the surge of unfairly traded imports from China. Unfair Chinese trade practices are severely hampering our efforts to achieve the desired rates of return necessary to attract capital and to maintain competitiveness in this critical U.S. industry.”

The unfair Chinese trade practices documented in the filing include sales at less than fair value and subsidies to the Chinese industry. The alleged margins of dumping range as high as 88 percent. The subsidies documented include policy loans, land use programs, tax subsidies, input material subsidies, grants and export tax subsidies.

The petition also addresses an export subsidy nominally known as a value-added tax rebate program. The petition alleges that this rebate is discretionary and excessive, and that the government of China uses this particular program to provide an advantage to Chinese exports in global markets.

The Chinese steel industry has been nurtured and encouraged by the Chinese government for decades. Even so, as recently as 1990, Chinese steel production was still less than that of the United States, the European Union or Japan. Today, Chinese steel production exceeds that of the United States, the European Union and Japan combined. This magnitude of growth is the direct result of multiple subsidy policies and programs established and maintained by the Chinese government, contend U.S. executives.

“Allied operates four of the most efficient pipe plants in the world geographically spread through the U.S. market in Philadelphia, Chicago, Phoenix and Pine Bluff, Ark., to serve the entire U.S. market in a freight-beneficial manner. However, absent an end to dumping and a reduction in imports from China, we will be forced to make reductions at our plants despite very strong demand for our products,” says Rick Filetti, president of Allied Tube & Conduit.

“It would be a tragedy for the United States if the most efficient and environmentally compliant plants in the world were shut down and the United States nonresidential construction market became dependent on products imported from inefficient, environmentally noncompliant, high-freight-cost mills in China for this essential product to the U.S. economy,” he adds. “We are asking for the U.S. government to restore the level playing field and allow the rules of comparative advantage to hold sway.”

Under the antidumping and countervailing duty statutes, the International Trade Commission will make a preliminary injury determination by the end of July. The Department of Commerce should issue preliminary determinations in the countervailing duty and antidumping duty cases in October and November of 2007.

U.S. Producers Question
Chinese Commitments
The American Iron and Steel Institute and the Steel Manufacturers Association have expressed strong doubts regarding China’s stated commitment to limit steel exports to 10 percent of total production. The two Washington, D.C.-based trade associations, which together represent nearly all North American carbon steel production, pointed out that China has made other commitments regarding steel production and trade in the past—none of which it has kept.

“We have seen posturing like this by China before,” says Andrew G. Sharkey III, president and CEO of AISI. “China makes promises, and then ignores them. China promised to limit new capacity. It has not. China promised to take its most inefficient and polluting steel mills out of production. It has not. China promised to allow its currency, the RMB, to revalue to a market level. It has not. It’s not clear to me why we should believe China’s promises now. We intend to watch what they do, not what they say.”

Thomas Danjczek, president of SMA, adds: “If China exports 10 percent of its production, its exports will equal half of U.S. annual production. China is not a low-cost steel producer. What gives the Chinese government, with its state-owned steel industry, this sense of entitlement to the North American market, and the right to determine the amount of steel to be exported? China intends to continue expanding its steel production, which means that exports will continue to expand as well. It takes real nerve to claim that this is restraint, when China is really declaring its intention to increase exports of steel that it should never have been produced in the first place.”

AISI and SMA have previously expressed concerns over the breakneck expansion of the Chinese steel industry, which has grown by nearly 400 percent in the last 10 years, and its impact on world markets for both steel and manufactured goods using steel. In 2006, the two associations sponsored a comprehensive study of significant subsidies to the Chinese steel industry. The study concluded that the Chinese government continues to direct the expansion of the steel industry and to provide the industry with massive subsidies.

“By focusing on limiting exports, China is trying to avoid the real issue, which is subsidies,” says Sharkey. “China is still subsidizing its steel industry, in violation of its WTO commitments.”

MSCI
Steel, Aluminum Inventories
Drop in May as Demand
Slows in U.S., Canada
With demand for industrial metals softening, inventories of steel and aluminum products at service centers in the United States and Canada fell during May in a range of 2 to 5 percent from April’s levels, reports the Metals Service Center Institute, Rolling Meadows, Ill., in its latest Metals Activity Report.

Steel shipments fell from May 2006 levels in both countries, with the U.S. shipment decline of 11.3 percent reflecting, in part, difficult comparisons with unseasonably high growth in steel shipments a year ago. Steel shipments from Canadian service centers continued to be adversely affected by the strong Canadian dollar. Rebalancing of inventories to match soft demand continued in both countries.

Steel product activity
May steel shipments from U.S. service centers totaled nearly 4.7 million tons, down 11.3 percent from the 2006 month. Year-to-date shipments of 22.9 million tons were down 6.6 percent from the same period last year. U.S. steel product inventories at the end of May were nearly 14.1 million tons, down 1.6 percent from inventories at the end of May 2006. At May shipping rates, steel supplies were sufficient for 3.0 months, the lowest months-on-hand figure since June 2006.

Steel shipments from Canadian service centers totaled 338,800 tons, 10.9 percent lower than May shipments a year ago. Steel shipments for the year to date were down 6.9 percent, to 1.6 million tons. Canadian inventories of steel products totaled almost 1.3 million tons at the end of May, or 4.8 percent higher than a year ago—the lowest level of inventories in a year. At May shipping rates, Canadian steel stocks were sufficient to last 3.7 months.

Aluminum product activity
U.S. aluminum product shipments fell 8.7 percent from May 2006, to 98,100 tons. Year to date, aluminum shipments were down 4.1 percent, to 503,600 tons. Inventories fell to 2.1 percent below year-earlier levels, at 345,300 tons of aluminum, marking the first time since June 2006 that inventories were lower than those of the same month in the previous year. At May shipping rates, aluminum stocks were sufficient to cover 3.5 months of shipments.

Canadian aluminum shipments fell 8.1 percent in May, to 10,700 tons, while year-to-date shipments, at 50,900 tons, were down 5.2 percent from year-ago levels. Inventories dropped 11.6 percent below May 2006 stocks, to 28,400 tons, sufficient at May shipping rates for 2.7 months.

AISI
April Steel Shipments
Decline 3.4 Percent
The American Iron and Steel Institute, Washington, D.C., reports that for the month of April, U.S. steel mills shipped 8,849,000 net tons, a 3.4 percent decrease from the 9,159,000 net tons shipped in April 2006 and a 5.2 percent decrease from the 9,331,000 net tons shipped in the previous month.

A year-to-year comparison of year-to-date shipments shows the following changes within major market classifications: service centers and distributors, down 7.3 percent; automotive, down 3.2 percent; construction and contractors’ products, down 1.1 percent; and oil and gas, down 9.8 percent.

ISM
PMI at 55 percent; New Orders,
Production and Employment
Growing; Inventories Contracting
Economic activity in the manufacturing sector expanded in May for the fourth consecutive month, while the overall economy grew for the 67th consecutive month, say the nation’s supply executives in the latest Manufacturing ISM Report On Business.

“Manufacturing expanded in May as the PMI rose to its highest level in the last 12 months. Both the New Orders and Production Indexes indicated growth, continuing a trend that is now in its fourth month. The ISM Inventories Index indicates that manufacturers are now in their 10th month of inventory reduction. A major concern of respondents is the rate of price increases covering a wide variety of commodities,” said Norbert J. Ore, chair of the Institute for Supply Management Manufacturing Business Survey Committee.

The 12 industries reporting growth in May, listed in order, are: Nonmetallic Mineral Products; Fabricated Metal Products; Food, Beverage & Tobacco Products; Chemical Products; Petroleum & Coal Products; Computer & Electronic Products; Miscellaneous Manufacturing; Transportation Equipment; Machinery; Wood Products; Textile Mills; and Electrical Equipment, Appliances & Components.

Manufacturing growth accelerated in May as the PMI registered 55 percent, an increase of 0.3 percent when compared to April’s reading of 54.7 percent. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting. A PMI in excess of 41.9 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the current PMI indicates that both the overall economy and the manufacturing sector are growing.

IISI
Asia Leads Growth in Steel Production
World crude steel production for the 67 countries reporting to the Inter­ national Iron and Steel Institute, Brussels, Belgium, was 112.2 million metric tons in May, a 6.4 percent increase vs. May 2006.

Asian mills lead the increase. China produced 41.3 million tons of crude steel in May, an increase of 15.7 percent compared to the same month of 2006. Japan produced 10.2 million tons, an increase of 2.6 percent. South Korean production was 4.4 million tons, an increase of 6.3 percent. May crude steel production in India was 3.7 million tons, an increase of 2.8 percent.

North American mills produced about 11.1 million tons in May, down 5.7 percent from May 2006. For the first five months of the year, North American crude steel production was down 5.2 percent, according to IISI.

SSINA
Specialty Imports Increase
13 Percent in First Quarter
Imports of specialty steel products increase by 13 percent in the first quarter vs. first-quarter 2006, according to the latest data from the Specialty Steel Industry of North America, Washington, D.C.

SSINA reports the following on U.S. consumption and imports by product line for the year to date through March vs. the same period in 2006:

  • Stainless steel sheet/strip: Imports were 107,762 tons, an 8 percent decrease; U.S. consumption was 398,870 tons, a 13 percent decrease.
  • Stainless steel plate: Imports were 35,120 tons, a 90 percent increase; U.S. consumption was 100,722 tons, a 31 percent increase.
  • Stainless steel bar: Imports were 32,897 tons, a 28 percent increase; U.S. consumption was 65,094 tons, a 22 percent increase.
  • Stainless steel rod: Imports were 8,855 tons, an 11 percent increase; U.S. consumption was 18,927 tons, an 8 percent increase.
  • Stainless steel wire: Imports were 11,505 tons, a 1 percent decrease; U.S. consumption was 21,705 tons, a 2 percent increase.

Imports of total stainless steel, comprising the above product lines) were 196,139 tons, a 9 percent increase; U.S. consumption was 605,319 tons, a 4 percent decrease; three-month import penetration was 32 percent, a three percentage point increase.

 
 

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