Skyrocketing overcapacity in the global steel sector continues
to be one of the U.S. industrys main challenges,
particularly as weak trade laws and lax enforcement encourage
many foreign mills to send unfairly traded volumes stateside, a
top U.S. Steel Corp. executive said.
"I think we can all
agree that our industrys biggest challenge today remains
the state of the global economy and its ongoing impact on the
steel industry," Mario Longhi, president and chief operating
officer of Pittsburgh-based U.S. Steel, said in a keynote
address at the Steel Success Strategies XXVIII conference in
New York sponsored by AMM and Englewood Cliffs,
N.J.-based World Steel Dynamics Inc.
Demand for steel
products in the United States, particularly for markets related
to the booming energy sector, is on the rise, according to
Longhi. However, with foreign steel mills rapidly ramping up
capacity and some choosing to flood the U.S. market with that
additional tonnage, domestic steelmakers havent reaped
the full benefits of the energy-related uptick, he said.
"Our industry and the
U.S. economy are not realizing the full benefits of this
opportunity due to recent significant surges of imported
tubular products. While the economic recovery of the United
States has been slow and uneven, it is still a relatively
attractive destination for certain steel products compared to
other regions of the world," Longhi said, citing a 52-percent
spike in casing and tubing imports and a 42-percent bump in
flat-rolled imports between 2010 and 2012.
"As producers around
the world scramble to fill their plants, the pressure on the
United States market has intensified," Longhi said.
One factor driving the
surge in low-priced imports is the emergence of state-owned
enterprises in the steel industry that at times operate in
contradiction to market fundamentals, he said.
"The bottom line is
that for several decades now, many governments have found the
temptation to promote steel production," Longhi said, adding
that China is at the top of the list in terms of concerns.
is still not a market economy, a fact proven time and again by
various investigations into government bodies," he said.
"Subsidies, export restrictions of raw materials, currency
manipulation and state-owned enterprises both inside and
outside their borders are just a few of the actions being taken
by the Chinese government, some of which directly contradict
(World Trade Organization) obligations and Chinas formal
promise to abide by them."
governments policies, Chinas steel production has
soared to a projected 748 million tonnes this year from 128
million tonnes in 2000, "which is significantly above their
internal demand," Longhi said.
"That production and
resulting exports has led to innumerable trade conflicts around
the world," he said, noting that "substituting government hopes
and goals for market demand and needs has often had results
that are all too predictable."
As a result of
skyrocketing imports from China, as well as a number of other
global steel players, the U.S. trade deficit for iron, steel
and ferroalloys totaled $21 billion last year, Longhi said,
marking the highest deficit since 2008 and the third-highest of
And that startling
trend is going to continue unless Washington steps up and makes
a change, Longhi said.
and market participants around the world often agree and say
the right things, the words are all too often not matched by
actions and reality," he said.
One necessary change
is the better enforcement of trade laws already in existence in
the United States, according to Longhi.
"We need to do a
better job enforcing the trade orders we have on the books,
addressing head-on the growing and brazen schemes we are seeing
to circumvent trade relief," he said.
Longhi also called for
a more proactive approach to trade laws rather than the current
method of waiting until the damage has been done to initiate an
"We need to make sure
that industries do not have to wait years and suffer extensive
injury, which profoundly impacts jobs, investments, R&D,
technology and development, and sustaining capex, before
measures can be taken to address proven unfair trade," he
Washington also needs
to recognize that currency manipulation itself is a form of
subsidization, Longhi said, citing the need for federal
legislation addressing the issue.
policymakers are vigilant, I believe we can work through the
current era of excess capacity and move toward a new era in
which success in the steel industry will be driven solely by
hard work and innovation," he said.