Dumping Of Steel

.. percent), Russia (76 percent to 100 percent), South Africa (17 percent), Slovakia (35 percent to 44 percent), Taiwan (38 percent to 59 percent), Thailand (94 percent to 122 percent), Turkey (33 percent and Venezuela (25 percent to 56 percent). Cold-rolled imports from these countries totaled 2,283,710 tons in 1998, accounting for 13.7 percent of the total U.S. domestic market and 63.2 percent of all cold-rolled imports. THE EFFECTS The dumping of foreign steel into the U.S. market can have a positive effect on the economy; However, dumping can effect the economy in a negative way as well.

First lets look at the positive effects dumping has on the economy. The dumping of steel by foreign countries has caused the price of commodity grade sheet steel to drop to as little as $220 a ton, down from around $300 a ton. The lower prices due to steel imports have been a boon to steel-using industries, from carmakers to lawnmower manufacturers. Companies are always looking for ways to cut costs and increase their total profit. Companies that use steel in the manufacture of their products will benefit from the use of substitutes that the foreign steel companies provide through lower priced steel.

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This will allow the steel-using industries to hold the line on price increases of their products, allowing the American consumer to benefit from lower prices due to dumping. In 1998, the demand for steel was so great that domestic producer’s were themselves taking advantage of cheap foreign produced steel. A number of domestic steel producers were buying cheap slabs from foreign producers to run through their mills. Domestic producers found that it was cheaper to buy slabs from foreign mills than to make the slabs themselves (Robertson, 1998). For the U.S. steel industry, the negative effects of dumping out-weigh any positive effects. Demand for steel in the U.S.

has been perfectly inelastic for much of the 1990s meaning that whatever the steel makers could produce the market would absorb no matter what the price. If demand is inelastic, a price rise leads to an increase in total revenue, and a price fall leads to a decrease in total revenue (Arnold, 1998). Dumping leads to lower prices, although demand is the same, total revenue decreases. Since 1997, The U.S. steel manufacturing industry has been suffering from the record level of steel imports that have been flooding the country.

The situation has caused the collapse of a number of steelmakers, a reduction in operating levels and the layoff of thousands of workers. Before 1998, the peak level of U.S. steel imports was 27 million tons. Steel imports, in 1998 reached an all-time high of 41.5 million tons, a 54-percent increase over the previous record level (Garvey, 1999). U.S.

Steel producers blame more than 10,000 layoffs in late 1998 and the bankruptcies of three steel companies in 1999 on the surge in steel imports. PROTECTION The illegal dumping of foreign steel products in the U.S. is depressing the steel-manufacturing sector in the U.S. America’s steel industry wants special protection from falling prices in the global marketplace. Should this come at the expense of our nation’s overall economic health? U.S. steelmakers and their unions have banded together and petitioned for protection against illegally dumped foreign steel.

This campaign Stand Up For Steel has worked by putting the pressure on politicians in Washington to do something. Doing something, particularly when it comes to a political heavy hitter like steel means relying on anti-dumping statutes. Anti-dumping laws, which penalize companies for selling their products for less than production cost, have been a useful cover from global competition for the steel industry: one out of three anti-dumping actions in the past 20 years was directed at imported steel (Morrissey, 1999). The U.S. anti-dumping law is stacked in favor of domestic producers, virtually guaranteeing that a dumping margin will be found. The Commerce Department upholds more than 95 percent of all dumping charges.

In addition, U.S. law punishes foreign producers for engaging in practices that are legal, and common, in the domestic U.S. economy, where struggling companies often sell at a loss to clear inventory and cover fixed costs (Griswold, 1998). In March of 1999, the House of Representatives voted overwhelmingly, (289-141), to slap quotas on dumped steel imports. The quota bill would cost the private sector almost $900 million over the next three years, according to a Congressional Budget Office report (Morrissey, 1999). The quota bill would drive up domestic steel prices; this would be a boon to the relatively small steel-producing sector but a burden to far larger steel-using industries. Higher steel prices will drive up costs and depress sales and employment in steel-using sectors such as automobiles, construction, home appliances and food packaging. For Example, the average five-passenger sedan contains $700 worth of steel, a fact that has prompted General Motors to file a brief this fall with the U.S. International Trade Commission urging caution about steel dumping duties.

Caterpillar Inc., a major exporter of construction equipment, buys 600,000 tons of steel a year. General Electric uses 750,000 tons a year in home appliances and a range of other products. Overall, the major steel-consuming sectors of the U.S. economy transportation equipment, fabricated metal products, and industrial machinery and equipment employ 3.4 million production workers, compared to 175,000 employed by the basic steel industry (Griswold, 1998, p.2). For every steelworker whose job is made more secure by protection, nearly 20 workers in steel-using industries will be made less secure (Griswold, 1998, p.2).

Propping up steel prices will cheer unions and stockholders of domestic steel, but will hurt far more numerous Americans who buy and make steel products. Most steel companies posted profits in late 1998 and all of 1999. Lower prices will potentially drive some of the less efficient U.S. producers out of business, but the more efficient among them, will survive and thrive, leaving the U.S. industry more competitive overall.

FUTURE OUTLOOK The U.S. steel industry can look forward to a prosperous year 2000 and beyond. Kenneth Hoffman, steel industry analyst with Prudential Securities, .New York, predicted hot-rolled sheet prices would be in the range of $365 per ton to $400 per ton. Hoffman also predicted prices for cold-rolled sheet would be in the range of $425 per ton to $465 per ton (up, from current prices of around $410 per ton) and galvanized sheet up to $525 per ton to $600 per ton from current prices of around $420 per ton. I think U.S.

prices will go nuts next year, Hoffman said. Asia right now is a boom or bust economy. It is the U.S. of 100 years ago, and it will be significantly stronger next year. That strength will help curb the high levels of imports that came from Asia to the U.S.

in the second half of 1998 and early 1999 (Robertson, 1999). This will cause less dumping into the U.S. market, thereby allowing domestic steelmakers to raise their prices. Furthermore, supply will decrease as demand rises. Thus increasing total revenue for most steel companies.

CONCLUSION Dumping is a worldwide problem, the breakdown of the Russian economy and the Asian financial crisis were problems during the 1990s. Finding ways to deal with dumping is one of the major issues facing U.S. steel makers in the new millenium. Should the U.S. Government protect the steel industry at the expense of the rest of the U.S.

economy? Furthermore, at the chance that foreign countries will retaliate due to punishment levied against them because of dumping. As global expansion continues, U.S. steelmakers will have to become more aggressive in finding ways to compete in the global marketplace. This will have to be done through modernization of old mills and the use of new technologies to make a better product at lower costs. Dumping will always be a threat to the U.S. steel industry.

Finding the way to fight it will be the big challenge facing the U.S. steel industry in the 21st century. Business.