U.S. Steel Imports Spark Trade Complaints

By Dow Jones Business News, 
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U.S. steel imports are approaching record levels, sparking the highest number of trade complaints in more than a decade and igniting calls for new import tariffs.

American steelmakers filed 38 trade cases last year, the highest number since 2001, when the industry won White House backing for higher tariffs and penalties on state-subsidized or otherwise unfairly traded steel. The cases represent a wide variety of products--from pipes used in gas drilling, to specialty pieces used in electrical transformers.

Only two cases have been resolved, with one in favor of the U.S. steel industry. But a dozen other rulings are expected this summer, including for a closely watched case regarding steel used for oil and gas drilling.

The surge in imports reflects oversupply abroad, which has cut prices, and strong U.S. demand spurred by energy drillers and a resurgent auto industry. First-quarter steel imports by U.S. companies rose 36% from a year earlier to 10.6 million metric tons, according to research firm Global Trade Information Services. That was the highest level since the record 13 million tons reached in 2006.

The global steel industry has the capacity to produce over a half-billion tons more steel than is made--twice the level of 2001, according to a report released Tuesday by the Alliance for American Manufacturing.

The report, which was backed by the steel industry, in large part blames high levels of steel imported from China. Beijing on Tuesday reported that steel exports last month reached their highest level since 2008.

Many economists say the solution is to close some mills--in the U.S. as well as abroad.

China said its steel exports are rising because they are globally competitive. "China's policy is not to encourage high-volume steel exports, but just to fulfill [Chinese] demand," said Chi Jingdong, deputy secretary-general of the state-backed China Iron and Steel Association.

Manufacturers and steel processors generally oppose tariffs.

Domestic steel mills tend to use the trade laws as a "commercial weapon, " said Jeff Himmel, president of Artco Steel Corp. His White Plains, N.Y., company imports half its steel for processing into plate which is then processed further into finished goods. "Sometimes these trade cases are justified and sometimes they are not."

Imposing new import tariffs would be only so fruitful, he said, since "that one big anchor of excess world-wide capacity is still there."

Foreign steel fetches discounts of as much as 20% but ordering it is risky, said Lisa Goldenberg, president of Delaware Steel Co. of Pennsylvania, a distributor. "I can order the foreign steel and get it in August, but the domestic mills don't have a price for August yet, so I don't know if it's a good deal or not," she said.

The operators of U.S. mills, such as AK Steel Corp., U.S. Steel Corp. and ArcelorMittal, want to slow imports of imported finished steel. But many at the same time are big importers of raw steel, said John Packard, the publisher of Steel Market Update.

AK Steel said it has always imported some steel as needed. A spokesman declined to comment on proposed tariffs but said, "We think we can always compete on a level playing field."

U.S. Steel cited the effect of low-price imports on its workers. "It's not just those of us who work at U. S. Steel who are affected by unfair trade--it's our families, neighbors and other business owners," Ralph Mercado, a U.S. Steel expediter in Ohio, said in news release.

ArcelorMittal declined to comment.

Trade friction between Washington and Beijing regarding steel isn't new. But the recent increase in China's steel exports has heightened the tension.

China's government vowed last year to reduce its excess steelmaking capacity. But production has continued apace as Beijing has worried about slowing economic growth.

The government on Tuesday said China's crude steel production rose 2% last month to a record daily average of 2.3 million metric tons. The previous record was set in March. China's steel exports reached 62.3 million tons last year, just shy of the record set in 2007.

A handful of preliminary trade decisions have been issued, and some tariffs have been levied. Washington this month imposed preliminary tariffs of 159.2% on Chinese grain-oriented electrical steel, which is used to make transformers.

A wave of rulings is expected this summer, the most closely watched involving South Korean steel pipes and tubes used in drilling for oil and natural gas.

The country shipped $818 million in such products to the U.S. last year. U.S. trade officials in an initial ruling refused to impose new tariffs.

Democratic Sen. Sherrod Brown of Ohio, a chief advocate for tariffs, said U.S. manufacturers should accept slightly higher prices for domestic steel. His state has several large steel producers, mainly involved with items used in natural-gas drilling.

"Drilling for the Marcellus Shale is a profitable business already," he said in a conference call recently.

"It can be profitable using steel from Lorain, Ohio," he said. "It's a little bit like arguing for people to buy a stolen TV just because they're cheaper; they're breaking international law."

Write to John W. Miller at john.miller@wsj.com and Chuin-Wei Yap at chuin-wei.yap@wsj.com

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