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Mills urge broad scope for 232; consumers balk

May 24, 2017 | 04:24 PM | Michael Cowden

Tags  Section 232, Commerce Department, Wilbur Ross, Nucor, John Ferriola, U.S. Steel, David Rintoul, AK Steel Roger Newport


CHICAGO — U.S. Commerce Secretary Wilbur Ross said his department is aiming to complete its Section 232 investigation into steel imports by the end of June.

That’s far ahead of the 270 days the department has, by law, to complete its report and recommend action to President Donald Trump.

The president could take action as soon as July should Ross meet the self-imposed June deadline.

Ross revealed the timeline on May 24 in Washington during a public hearing regarding the Section 232 probe.

Section 232 of the Trade Expansion Act of 1962 allows the president to slap tariffs on imports as well as impose volume quotas if he decides they pose a threat to national security.

Domestic steelmakers at the hearing urged the Commerce Department to define “national security” broadly by including not only military goods but also products—such as concrete reinforcing bar—used in roads, bridges and other infrastructure.

Mill executives also said their commercial viability was a matter of national security because, if they aren’t making money, they can’t afford to invest in the research necessary to develop future grades of steel for military applications.

“U.S. steelmakers can barely maintain what they have, let alone continue to invest in developing new products,” said John Ferriola, chairman, president and chief executive officer of Charlotte, N.C.-based Nucor Corp., the largest steelmaker and recycler in the United States.

Ferriola also urged Commerce to block imports of semi-finished goods such as slabs because he said the U.S. might not be able to rely on China, Russia or other strategic adversaries to supply them during a national security emergency.

Mill officials not only blasted China—typically a target of domestic mill ire—but other major steelmaking nations such as South Korea, Vietnam and India for allegedly dumping their material into the U.S. market.

Traditional anti-dumping and countervailing duties have not proven up to the task of stopping such alleged dumping. And so tariffs, volume quotas or a combination of such measures are necessary to stop dumped and subsidized imports, they said.

Steel tubulars are one of the many markets that have been decimated by imports, said Barry Zekelman, CEO and chairman of Chicago-based pipe and tube maker Zekelman Industries Inc., one of the largest flat-rolled steel consumers in the U.S.

“We have to break the cycle of dependence on imported pipe and tube—and the only way to do that is to draw a hard line,” he said.

Such comments came as steelmakers at the hearing ticked off a list of products they considered necessary to maintain national security.

Imports of oil country tubular goods (OCTG) should be stymied because they pose a threat to national security when it comes to oil and gas production, said David Rintoul, president of Pittsburgh-based U.S. Steel Corp.’s tubular products division. “Foreign suppliers have made it their mission to steal this market from U.S. companies,” he said.

Rintoul focused his ire on South Korea, the largest offshore supplier of OCTG to the U.S.market. But he also accused competitors headquartered abroad but with plants in the U.S. of relying on imports instead of domestic production to meet customer demand.

AK Steel Corp. CEO Roger Newport said electrical steels should be protected from imports because the electrical grid is critical to national security. And it’s not enough to protect just electrical steels because tariffs on steel alone will encourage imports of finished goods such as transformers and generators, he said.

He also noted that the West Chester, Ohio-based steelmaker is now the only domestic producer of certain electrical steels. “If we were to exit the market, there would be no electrical steelmaking in the United States,” he said.

Commercial Metals Co. (CMC) president and CEO Barbara Smith took a similar tack, contending that rebar should be protected on national security grounds. Rebar from the Irving, Texas-based steelmaker was used to rebuild the Pentagon following the Sept. 11, 2001, attacks, she said. “God forbid we are attacked again on our own soil without the ability to make the products, like rebar, to repair our country."

Smith also noted that CMC has seen plans to build a national network of rebar micro-mills—like its plant in Mesa, Ariz.—shelved as a result of imports.

Stainless steel and specialty metals should likewise be protected from imports on national security grounds, said Terry Hartford, vice president of defense products for Pittsburgh-based Allegheny Technologies Inc. (ATI). ATI supplies specialty steels, some developed in coordination with the U.S. Department of Defense, for fighter jets, tanks and nuclear-propelled ships."

These are not off-the-shelf items,” he said.

But ATI relies on high-volume commercial products—such as stainless steels—to generate the revenue necessary to develop cutting-edge military material. Any penalties resulting from the Section 232 probe must recognize the link between commercial markets and national defense, Hartford said.

Indeed steel mills themselves could be considered critical to national security because they are where breakthroughs happen, said Dennis M. Oates, chairman of the Specialty Steel Industry of North America. “Our steel mills are our laboratories,” he said.

Steel consumers countered that Section 232 protections might harm national security should steel be protected at the expense of the wider economy. And if penalties are imposed, there should be carve-outs for items not produced in sufficient quality or quanity by U.S. mills, they said.

Japanese wire rod, for example, should be excluded from any Section 232 penalties, said Tim Johns, vice president of manufacturing for Nippon Steel and Sumikin Cold-Heading Wire Indiana Inc. U.S. mills are unable to make the high-quality rod necessary for demanding applications such as automotive fasteners. Should restrictions be imposed, workers at the company’s plant in Shelbyville, Ind., could lose their jobs, as could employees at downstream customers, he said.

Robert Budway, president of the Can Manufacturers Institute, said tinplate imports should be excluded because the quality of domestic tinplate—the raw material used to make cans—is inferior to that of foreign tinplate. U.S. mills also lack the capacity to supply domestic demand and are chronically late with shipments, he said.

Thin-gauge aluminum and hot-dipped galvanized steel used for heating, ventilation and air conditioning (HVAC) should be exempted because U.S. mills are either not interested in making it or cannot produce it at a competitive price, said Suzi Agar, president of the Air Distribution Institute. Light-gauge galvanized steel has few national security applications, and tariffs would only serve to drive up building costs, she said.

And a hard line on imports could be devastating for West Coast manufacturers, said John Cross, president of Steelscape LLC, a joint venture between Australian steelmaker BlueScope Steel Ltd. and Japan’s Nippon Steel & Sumitomo Metals Corp., with operations in California and Washington. Duties on flat-rolled steel from Australia, for example, have not had the intended result of forcing the company to source from U.S. mills instead of its joint-venture partners. Steelscape has simply sought out other import sources because ocean freight costs less than rail freight from mills east of the Rocky Mountains, he said.

Indeed, Section 232 penalties might have the perverse impact of hammering the very defense industries they are purported to protect, said Gary Horlick, international trade counsel for the American Institute for International Steel (AIIS). Retaliation from other countries would be a “near certainty” and would likely be aimed at U.S. arms exports as well as U.S. exports of agricultural goods, he said.

“If you are looking at the national security of the United States, please include food,” Horlick said.

Experience with unconventional trade restrictions serves as a cautionary tale, said Bobby Landry, vice president and chief commercial officer for the Port of New Orleans. Section 201 safeguard measures imposed under the administration of President George W. Bush in 2002 cost more jobs across the U.S. economy than exist in the nation’s steel industry, he said.

New Orleans—where steel accounts for 45 percent of port volumes—saw revenues and jobs plunge when the Section 201 measures were in place, Jaskot recalled. And farmers were also hurt because they rely on the same barges that carry steel imports upriver to take their crops downriver for export.

“The importance of this commodity cannot be overstated, he said.

Canada should also be excluded from the Section 232 probe, given the close integration of the two countries on manufacturing and national security issues, said Leo Gerard, international president of the United Steelworkers (USW) union.

Michael Cowden
mcowden@amm.com





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