Who's 'dumping' on whom?
By Staff -- Purchasing, 3/11/1999
Some steel firms in Japan and Brazil face hefty tariffs on hot-rolled steel sheet if the Clinton Administration follows through in June on preliminary rulings that the foreign mills dumped steel in the U.S. Commerce thinks producers from those countries sold steel in U.S. markets in 1998 at prices dramatically below production costs or home-market prices.Hot-rolled sheet makes up 20% of U.S. steel imports. Imports of hot-rolled carbon steel from Japan, Brazil, and Russia jumped more than 60% during the first six months of 1998, compared to the same period in 1997. During the same period, spot prices for the product actually rose $10/ton. However, tags later crashed 24% ($80/ton), and the U.S. producers blame 10,000 layoffs in late 1998 and three company bankruptcies in early 1999 on the import surge.
Commerce Department found that goods from Japan may have been sold at up to 68% below the fair value and from Brazil at up to 71%. The government also found that Brazil may have illegally subsidized its producers, driving down the price of steel by another 9%. The proposed tariffs on Brazilian steelmakers range from 57% on Companhia Siderurgica Nacional to 80% on Usinas Siderurgicas de Minas Gerais. Nippon Steel, the world's largest steelmaker, must pay 25% while Kawasaki Steel will pay 68% and NKK Corp. will pay about 31%.
Wary of further aggravating a troubled Russian economy, Commerce held off on findings in a similar complaint against that country, saying the U.S. was working on a settlement agreement to reduce future imports and avert tariffs.
Steel execs, naturally, welcomed the preliminary ruling. Speaking for the industry, Curtis Barnette, CEO of Bethlehem Steel, notes: "The American steel industry has modernized and become the low-cost producer for the U.S. market. Yet, while the U.S. industry has made the difficult restructuring decisions and invested the capital to modernize and become competitive, other countries have simply continued their specific actions of protecting their domestic markets and dumping products here. The foreign producers have been making the U.S. and Canada the world's steel dumping ground."
On the other hand, the exporters continue to blame normal market factors. Fujio Ono, chairman of the Japan Steel Information Center, sees the dumping charges as "unjustified, ill-considered, and counterproductive" since the record-high 41 million tons in steel imports wouldn't have happened if domestic buyers hadn't ordered the steel.
Ono adds that "the same normal market forces now are working to lower imports without government intervention." Commerce, itself, has reported that steel imports dropped in December, which means that bookings slowed at least 60 to 90 days ahead of those deliveries. Ono, also the president of NKK America Inc., says that "Japan's 1998 steel exports were the result of market conditions, and the market, not government-imposed restrictions, should dictate future U.S.-Japan steel trade."
Japan is the biggest steel exporter to the U.S., with shipments totaling $4.1 billion last year, according to Japan's Ministry of Finance. However, "there's no hot-rolled sheet business to be affected by the ruling because there are virtually no shipments of Japanese hot-rolled steel coming in," says Charles Butler, a director of the Japan Steel Information Center in New York. "Orders dried up last August and September. So Japanese steelmakers cut back on shipments when that demand sagged."
The findings may have a bigger impact on the Brazilian industry, which (along with numerous other nations not cited in the trade complaint) has continued to ship hot-rolled to meet orders. "Without a doubt, a permanent tariff on Brazilian hot-rolled is something that will interrupt the flow of trade," says Breno de Melo Milton, an investor relations manager at Usiminas, Brazil's second-largest steelmaker.
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