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AISI: Import Surge Threatens U.S. Industry

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U.S. steelmakers are struggling against the double hit of high imports and low steel prices, and their displeasure with inaction by government officials was clear in their remarks during last month’s American Iron and Steel Institute annual meeting in Chicago.

Speaking at AISI’s press conference May 4, top executives from five major mills described current market conditions, which are favorable in terms of demand, but onerous in terms of supply. Joining AISI President and CEO Thomas Gibson on the panel were AISI board members Chuck Schmitt of SSAB Americas, John Ferriola of Nucor Corp., Regulo Salinas of Ternium Mexico, Jim Baske of ArcelorMittal North America-Flat Rolled and Roger Newport of AK Steel.

As the panelists reported, U.S. steel shipments increased 3 percent in 2014 to 98.2 million tons. At the same time, finished steel imports jumped by 36 percent. Imports’ share of the U.S. market reached 28 percent last year, up from 23 percent in 2013.

The major cause of the steel import surge is a global overcapacity estimated at over 600 million tons in 2014. The oversupply has contributed to a 35 percent decline in the basic price of hot-rolled steel to around $440 per ton.

“The challenge of these imports remains particularly troubling considering that U.S. producers have been operating at or below 70 percent of capacity utilization. A number of facilities have been idled and workers have lost their jobs,” Schmitt said. “We are seeing this volume of imports because certain countries and their producers continue to disregard the rules of international trade,” added Ferriola.

While many nations engage in unfair trade practices, the executives said, China is of particular concern as its government-subsidized industry continues to build export-oriented capacity far in excess of its declining domestic demand.

Last year, China exported a record 101 million tons of steel. U.S. imports of steel from China surged 68 percent in 2014 and continued at record levels in this year’s first quarter. China also manipulates its currency, which gives its exports an additional subsidy, they noted.

Asked one reporter: Which product groups are affected by the import surge? “That’s an easy one. All of them,” said Ferriola, commenting on plate, rebar, sheet, structurals, OCTG and wire rod. “It is occurring across the board, particularly as we see other countries start to close off imports from consistent violators such as South Korea, Turkey and China.”

Without subsidies, there is no way foreign mills could compete in North America when domestic producers have the natural advantages of local logistics, abundant raw materials and cheap energy, said the executives, who have taken their case to Washington, but remain frustrated by the lack of progress on the trade front. “The administration has been far too soft on these foreign companies and countries. The Department of Commerce and the International Trade Commission have shied away from imposing tough duties that would actually change market behavior and provide real relief to domestic producers,” Ferriola said.

Responding to other reporters’ questions, the executives said the industry is considering all options for trade relief, including an appeal for emergency safeguard measures. The burden of proof on injury for a safeguard ruling is higher than in a trade case filing that seeks antidumping or countervailing duties, however.

Meanwhile, the healthy U.S. economy continues to act as a magnet for steel from weaker markets around the world. Steel demand is strong in the U.S., particularly from the automotive and construction sectors. The auto industry is expected to produce 17.3 million light vehicles this year and 17.7 million in 2016. Construction is forecast to grow at a 7-8 percent rate, even without additional funding for new roads and bridges.

The steel industry has responded aggressively to threats from competing materials for a larger share of the automotive market as carmakers strive to make vehicles lighter and more fuel efficient. Advanced High Strength Steel is the fastest growing automotive material, Newport said. “We are working with automakers to demonstrate that they can reach their weight reduction targets with the use of AHSS. It avoids the manufacturing cost penalty of switching to other materials. The business case for steel has never been stronger.”