Should the United States—often considered the self-proclaimed champion of free global trade—have reacted more swiftly to prevent the record-setting flood of imported steel that arrived on U.S. shores in 1998?

That is one question that policy-makers will have to consider as the U.S. steel industry—and many of its ancillary businesses including the scrap industry—tries to get back into the ring and compete after taking a pummeling from imports. Steel industry lobbyists spent much of 1998 contending that steel from nations such as Japan, South Korea, Russia and the Ukraine was being dumped at below production cost into the North American free trade area.

Those contentions by and large seemed to be met with a slow reaction from leaders in Washington, who either had other things on their minds or saw the health of the domestic steel industry as just one factor to consider in a climate of global economic turmoil.

THE IMPORTS AND THE DAMAGE DONE

As Asian economies began experiencing currency crises and then serious full-blown recessions, most economists predicted that North America would soon be awash in imports from the struggling nations.

Manufacturers of nearly any product ran the risk of struggling to fight against this tide, including steelmakers. But even though steelmakers could see what was coming, little short of a naval blockade could prevent the inevitable.

As 1997 turned into 1998, additional tons of imported steel coils, beams and bars began arriving at U.S. ports. Industry observers cringed as figures released month after month recorded one new record imported steel level after another.

By April of 1998, the American Iron and Steel Institute (AISI), Washington, announced that it had begun “stepping up its lobbying efforts to ensure that the U.S. steel industry and its workers do not become the victims of [the Asian] crisis.”

A few months later, the AISI began undertaking what it termed its 1998 Trade Competitiveness Communications Campaign. The radio and on-line campaign, which was targeted toward “opinion leaders” in the Washington, D.C. area, was designed to influence policy makers “on the urgency of maintaining fair trade laws and strictly enforcing them to prevent injury to the North American steel industry.”

Statistics began bearing out the AISI’s fears a short time later. In a status report released in August, AISI president Andrew G. Sharkey III declared that “the U.S. steel industry is facing an emerging steel trade crisis, with total steel imports up 7.2% from 1997’s record pace; total finished steel imports up 14% through May; finished steel imports from Asia up 79% from last year’s very high levels; and finished steel imports from the [former Soviet Union] . . . up an additional 24% from 1997’s record levels.”

The trend continued in subsequent months, with August 1998 marking a record month for steel imports into the U.S., as 4.4 million net tons were unloaded at American ports. (As of figures for November 1998—the most recent available—four million tons of steel were imported) 

By fall of 1998, the low pricing structure and increased competition began taking its toll on the bottom lines of North American steel companies. Acme Metals, Riverdale, Ill, and its Acme Steel Co. International Inc. subsidiary filed for Chapter 11 bankruptcy in late September. Acme president and CEO Stephen D. Bennett cited “greater than anticipated losses due to the rapid deterioration in steel demand and selling prices.”

Most steel industry executives, meanwhile, adopted a necessary defensive strategy of lowering prices to compete against the imports, and of slowly idling capacity minimize the amount of risk of producing large quantities of steel at a loss. The cost cutting activity has continued into 1999, with Nucor Corp., Charlotte, announcing in mid-January that it was slashing steel bar product prices to some customers from $85 per ton to $55 per ton.

By the third quarter of 1998, the ferrous scrap industry became affected by the import woes, as an increasing number of mills worldwide responded to what was now clearly a global steel industry overcapacity problem. The market for exported ferrous scrap dried up, while North American steel mills operated at 75% of capacity instead of 90%, thus pinching that market for scrap.

The North American steel industry had spent much of the 1990s proud of its status as a newly revitalized group of world-class competitors. Similarly, the Institute of Scrap Recycling Industries Inc. chose “Pride in the Industry” for its 1998 convention as a fitting theme for an industry that had established itself as an important part of the industrial landscape.

But now, the turmoil caused by events half a world away has both industries reeling and—in the case of the steel industry—asking for government help and protection as cutbacks, layoffs, and even bankruptcies began to occur.

HELPLESS OR HELP DEFERRED?

Could more have been done to stop the dumping of foreign steel onto American shores, and if so, when should action have been taken?

In an age when information travels at lightning speed, few people question that if the U.S. government had chosen to take quicker action against dumped steel, it could have been done.

Even a notoriously slow-moving body such as the federal government, with its current partisan leadership structure, probably had the ability to act more swiftly if the vast majority of leaders in Washington both:

a) believed that the situation was among the most urgent problems facing America and its citizens, and

b) were in agreement as to how to proceed.

Since what action there eventually was concerning the steel dumping situation (some voluntary agreements were forged in late 1998 and early 1999) occurred after making its way through several months of executive and legislative research, it can be concluded that—despite the pleadings of the steel industry—Washington did not make the situation a top priority.

Some might argue that distractions in the form of the November 1998 elections and the pre-impeachment scandal proceedings might have contributed to a lack of attention to the woes of the steel industry.

It should also be noted that many of the industrial manufacturers who consume steel saw their profitability enhanced by the plunging price of steel. It is possible that for every vocal lobbyist who pleaded for protection and help for the beleaguered steel industry, another quieter lobbyist was reminding elected officials in Washington that the profits of many of their constituent companies—and the pocketbooks of consumers purchasing vehicles, appliances and other items—were helped by the ultra-competitive steel situation.

There are other political issues that may have come into play as reasons why rapid barricades were not set up to keep out the glut of steel. Many politicians—and many of their corporate contributors—have spelled out their positions as friends of free trade. To overreact in the face of one case that was unfavorable to one U.S. industry may have been seen as going against an established track record.

Another factor concerned the intricacies of global diplomacy. Blocking Russian and Ukrainian steel at a time when the U.S. is striving to convince the people of those nations of the benefits of capitalism and the global economy may have helped stir up nationalistic feelings in those nations that would have run counter to long-term U.S. hopes for eastern Europe.

Thus, one theory holds that the U.S. government was willing to look indecisive in its anti-dumping actions since it had much to consider beyond the quarterly returns of U.S. steelmakers. That, of course, is little comfort to a laid off steelworker or the owner of a scrap metal company who could not keep his business operating in the face of plunging commodity prices.

PERMANENT SCARS

Many North American steel companies have reported plummeting profits or outright losses as the ill effects of competing with the dumped imports take their toll. It remains to be seen how many mills will be permanently idled or how many companies will have to work through bankruptcy proceedings. But there is little room for disagreement that the onslaught of imported steel has perpetuated gloomy market conditions in the steel and scrap industries that will probably last well into 1999, and possibly beyond.

The author is editor of Recycling Today.