Marking one year since President Bush initiated a steel 201 tariff program to respond to serious import injury, the U.S. steel industry issued a Progress Report on Tuesday, showing that the program is succeeding and that the industry is starting to turn the corner. At the same time, the Report stressed that the task of meeting the President's goals is not yet complete and that it remains absolutely essential to keep the program in place for the intended, full 3 years.
The Report further advises that it would be "an unconscionable national security risk to allow America to become significantly dependent on foreign steel sources ... especially in a time of war."
The Report states: "President Bush's steel tariffs are working, and the industry is just starting to turn the corner, but it is now more important than ever, given the recent deterioration in U.S. steel market conditions and steel's essential role in national security, that the President stay the course.
"The tariffs must be allowed to run for the full three-year term; there must be no unwarranted 201 product exclusions; surges from developing countries must be curtailed; and the Administration needs to focus even greater attention on the multilateral aspects of the President's Steel Program -- ending steel subsidies and other trade distorting practices, and eliminating inefficient and excess steel capacity worldwide."
The Report credits the President's steel program for enabling the most significant restructuring and consolidation in the domestic steel industry in decades to occur. Some examples that the Report highlights, include:
Bethlehem Steel is purchased by International Steel Group, a deal that could bring Bethlehem out of bankruptcy and create the nation's largest steel maker. Earlier this year, ISG acquired LTV Corporation, and later Acme Steel, which had ceased operations. Wilbur Ross, Chairman of W.L. Ross, which purchased LTV steel, identified "strong relief under Section 201" as one of the reasons he believes ISG will be successful.
U.S. Steel and AK Steel are both vying to acquire National Steel. Either way, it represents a dramatic consolidation underway within the industry.
Nucor Corporation acquires of Birmingham Steel's assets (involving Birmingham's mills in Alabama, Illinois, Mississippi, and Washington, U.S.). The transaction was completed on Dec. 9, 2002.
In July 2002, Nucor purchased the assets of Trico Steel Company in Decatur, AL, U.S., increasing its sheet production capacity by 30 percent. The facility, now known as Nucor Steel Decatur, successfully produced its first heat and cast its first slabs the week of Sept. 16 -- less than 60 days from closing of the acquisition.
In September 2002, Steel Dynamics Inc. (SDI) bought the Qualitech mill in Pittsboro, where it expects to begin producing steel bar by midyear. More recently, it agreed to buy the GalvPro II LLC galvanizing facility in Jeffersonville, IN, U.S. SDI is seeing improved profitability as a result of the President's program.
In August, Gerdau SA North American announced an agreement to acquire Co-Steel's assets in an all-stock transaction that will be accounted for as a "reverse take-over." The combined entity, Gerdau AmeriSteel Corporation, is now the second largest North American mini-mill steel producer, with 11 mill locations.
On Aug. 16, 2002, Republic Engineered Products LLC formally announced its launch with the completion of the purchase of select operating assets from Republic Technologies International LLC. RTI had filed for Chapter 11 bankruptcy in April 2001. The new REP operates six North American facilities and employs 2,500 workers, and remains the leading U.S. supplier of special bar quality steel. Sustained 201-import relief has been essential to REP's reorganization and consolidation.
The Report also notes that the impact of relief on steel users has been modest. Prices today, despite some recovery, are still below their 20-year average and for most manufacturers of steel-containing products, steel represents only a tiny portion of their costs. There has been no evidence of added costs to the end consumers as auto and appliance prices declined over the last year (2002).
"The ready availability of quality domestic steel products is not an issue," the Report states. "Adequate steel supply exists and is being maintained." The Report also points out that tariffs do not prevent steel products from entering the U.S. market, noting that imports of many finished products were, in fact, up substantially in 2002, compared to the year before, ever after the tariffs were put in place.
It also cites data showing that steel prices in the U.S. are now lower than they are in many markets around the world. In the case of China, for example, U.S. steel prices are lower by up to $70 per ton, the Report notes.
It also states: "The U.S. steel industry's domestic customer base will benefit long-term from having a strong and viable domestic steel supplier base. While import relief is not unduly harming steel users, it is absolutely essential to steel producers. Import relief is an essential component of President Bush's steel plan because it is stimulating global talks to reduce steel capacity and giving the domestic industry the time to make the critical decisions about investment, restructuring and consolidation that can lead to long-term health and competitiveness."
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