Rivals agree: '201' has inspired consolidation

WASHINGTON -- Ever since the Section 201 steel import tariffs took effect in March 2002, domestic steel producers and critics of the trade relief haven't agreed on much. But they do agree on at least one fundamental point: The industry has undergone a substantial amount of consolidation and reorganization in the wake of the controversial safeguard action.

At a U.S. International Trade Commission (ITC) hearing Tuesday, economists and trade lawyers representing foreign steel companies and U.S. steel consumers conceded that the industry had used the timeout as required to restructure.

Respondents found themselves making the difficult argument that continuation of the tariffs would slow the closing of inefficient capacity and "reorganizing many troubled companies."

It is just the opposite argument of the domestic steel industry, which claims that if the tariffs were eliminated before the three-year program expires, steel imports once again will surge, effectively halting the ability to pour much-needed capital into further industry consolidation (AMM, July 23).

Robert W. Crandall, a senior fellow at the Washington-based Brookings Institution, testifying before the ITC on behalf of foreign steel producers Tuesday afternoon, noted that blast furnaces operated by AK Steel Corp. in Ashland, Ky., Rouge Steel Co. in Dearborn, Mich., WCI Steel Inc. in Warren Ohio, Weirton Steel Corp. in Weirton, W.Va., and Wheeling-Pittsburgh Steel Co. in Steubenville, Ohio, all may be candidates for closure when their linings wear out this year--or in 2005 in the case of Wheeling-Pittsburgh and 2008 for AK Steel.

"Despite the consolidation of the industry that has already occurred, more inefficient capacity must be closed and the surviving facilities must restructure," Crandall said.

Many U.S. steel executives don't dispute his point.

Daniel R. DiMicco, president, vice chairman and chief executive officer of mini-mill kingpin Nucor Corp., Charlotte, N.C., restated for the commissioners earlier in the day a long-held mini-mill position against government loan guarantees used to aid struggling companies, including Weirton and Wheeling-Pittsburgh. DiMicco declared that not all U.S. steel companies would emerge as winners under the tariff relief, and not every troubled company could be reorganized into a successful competitor.

Crandall argued that by artificially increasing prices, the tariffs reduced pressure on integrated companies to restructure their operations, close inefficient facilities and press for more-efficient labor contracts. However, top steel executives from Nucor, Pittsburgh-based U.S. Steel Corp. and International Steel Group Inc., Cleveland, claimed they never would have managed to accomplish those very things without the "breathing room" provided by the tariffs.

Although respondents representing foreign producers and certain steel consumers are hopeful that the ITC report might include a recommendation to President Bush, others claim that doing so would go beyond the Section 204 statute--which governs the midterm review--unless the administration specifically asks for that input.

Deanna Okun, ITC chairman, noted in opening remarks that the commission was not requested to make recommendations in its Section 204 report.

The ITC is charged with conducting a series of hearings and gathering data for a midterm report to the President on the progress and specific efforts made by workers and steel producers to make a positive adjustment to import competition since the tariffs took effect.

Source: findarticles.com

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