Share this story
Close X
Switch to Desktop Site

Price of Steel Could Jump Under Proposed Tariffs

US seeks anti-dumping duties against steel from 19 nations

SIX months ago the price of leaded hot-rolled bar was $500 a ton. Although demand for this steel, used in the auto industry, is far from robust, the price today is closer to $600.

The reason for the price rise: The Commerce Department declared foreign producers were dumping the steel, a practice of selling a product abroad at prices lower than fair value. The ruling allowed domestic producers to raise prices because of new tariffs on imported steel.

About these ads

On Wednesday, the Commerce Department made a preliminary decision that steel mills in 19 countries were dumping other more-common types of steel: flat-rolled products that are mainly used in the cars and appliances. As a result of the finding, the agency proposed tacking on duties as high as 109 percent.

Last Friday, both LTV Corporation and US Steel raised prices on flat-rolled products by $20 a ton or 3 to 5 percent, effective April 4. The price hike, which analysts expect to hold, came despite the fact the industry is operating at 80 percent of capacity.

"There could be some panic by the service centers [wholesale buyers of steel], and end users could be concerned that a shortage could develop," says Fred Lamesch, president of Trade Arbed, a Luxembourg steel company. "If they all try to buy enough to cover themselves, the domestic mills could get booked out and prices could go through the roof."

Although the decision stems from Bush administration policies, it is being treated abroad as a Clinton administration decision. Hence the ruling is likely to push trade policy closer to President Clinton's front burner. The European Community called the action "unwarranted and wholly disproportionate" and said it would seek urgent consultations with the United States at the General Agreement on Tariffs and Trade organization in Geneva.

The duties hit some countries harder than others. Most steel products from Belgium and Canada received small tariff increases. But Japanese, Brazilian, Mexican, Spanish, British, and French steel products were assessed large duties. Nippon Steel, for example, will have a 27-percent duty added to its corrosion-resistant steel, while the British Steel Corporation will have a 109- percent tariff added to its plate steel exports.

"The tariffs will virtually eliminate a lot of producers from the US market," says Mr. Lamesch, who estimates any duty above 10 percent will prevent a company from competing in the US.

The decision comes at a time when foreign steel imports are shrinking. Last March, foreign steel was 20 percent of the US market. Foreign companies had a voluntary restraint agreement (VRA) to maintain their exports at that level. But negotiations for a new accord broke down. Since then the foreign share of the market has shrunk to 17 percent.

About these ads

John Griffin, the president of the American Institute for International Steel Inc. (AIIS), a lobbying group, said the Commerce finding is based on "distorted exchange rates." He says the German mark had fallen enough to reduce dumping margins by about 12 percent. Yet the dumping duty on some German steel was as high as 29 percent.

The Commerce decision may push the industry back into negotiations over new VRAs. Erwin Klein, a director of the AIIS, expects the talks to resume in February or March. The US industry may be forced into the negotiations to avoid retaliation by foreign countries.

Both Canadian and Mexican steel producers have filed dumping charges in their own countries against US steel.

The Clinton administration appears to support the finding. Commerce Secretary Ron Brown, in a statement issued with the ruling, said. "The administration fully supports the rights of the domestic industry to obtain relief from unfair trade practices under US laws and will make sure that these laws are enforced in a fair and effective manner."

The decision may result in some strange dislocations. USX Corporation, the parent of US Steel, buys hot-rolled steel products from Posco, a South Korean manufacturer, to supply a California rolling mill that is a joint venture with USX. On Wednesday, the Commerce Department added a 30-percent tariff to Posco's hot-rolled steel. If the tariff sticks, USX may have to ship in steel from other US suppliers, adding to costs. US Steel was one of 11 domestic producers that filed the dumping suit.

The Commerce Department will make a final decision on six of the countries on April 12 and then will finish its process by mid-June. If the final determination agrees with the preliminary finding, the International Trade Commission has 45 days to decide if the imports have materially injured the US industry.

Follow Stories Like This
Get the Monitor stories you care about delivered to your inbox.