Foreign steel company executives predicted at an international summit in June that the recent series of sharp world steel price increases would undermine White House efforts to force steelmakers around the world to drastically cut production.

At the behest of President Bush, several countries began meeting in Paris and ultimately forged an agreement to cut steel production in order to reverse a glut that had severely depressed global steel prices. Steel production excess estimates vary between 150 and 300 million metric tons/year, but the world makes as much as 20% more steel than it needs. Still, countries are reluctant to reduce steel production because it means putting their citizens out of work.

"If the price hikes continue, excess capacity will not be eliminated," says Keiichiro Shimakawa, chief executive officer and president of Japan 's Nippon Steel USA Inc. "The goal of global restructuring will not be reached." Alexei Mordashev, chairman of Russian steelmaker Severstal, says he doubts that commitments made at the Paris meeting will be adhered to. "There is very little incentive now," he says.

Ironically, President Bush's own actions are largely to blame for the reluctance to curb production. In March, he implemented tariffs of up to 30% on most imported steel, a decision that has angered the world's steelmakers and set off a wave of protectionist actions from foreign governments to prevent steel originally destined for the U.S. from flooding their markets and depressing their prices. These actions, in effect, have constricted supplies, resulting in higher prices in many countries and higher prices worldwide.

The world's steel producers have a history of glutting the market during boom times. It happened in 1995, 1998 and again in 2000. Though the steelmakers win short-term profits because their mills are running at capacity, inevitably the profits never last long because customers, searching for bargains, pit steelmakers against one another when the steel becomes plentiful.

Steel executives believe the industry has learned its lesson and won't glut the market this time around. In fact, they are predicting a global restructuring of sorts that would concentrate steel slab production to the few countries where it can be made cheaply because of an abundance of nearby natural resources of coke, iron ore and cheap labor. About 25.5 million tons of steel slabs are traded among countries each year. That number is expected to rise about 2% next year while consumption is expected to rise about 3%. However, if that happens, steelmakers might continue pushing for stronger slab pricing.