Steel's IMPORTant Issue

History repeats itself, just usually not this fast.

The steel industry is being hit by another import surge as foreign producers circumvent U.S. trade cases by using a tactic called "import switching."

The companies either simply make other products or switch their official sourcing location to other nations not affected by U.S. trade laws, steel supporters say. The American Iron and Steel Institute (AISI) claims it is a violation of U.S. trade statues and says the foreign metal is dumped, subsidized and injurious. The high level of imports is causing prices to deteriorate and is inflicting financial damage on U.S. firms, which enjoyed only a brief reprieve from the 1998 import barrage during the winter of 1999-2000. "There is no compelling reason why this should be happening," says AISI Chief Executive Andrew G. Sharkey. "Inventories are high, prices are low and demand is weakening."

Automakers probably aren't benefiting from low steel prices due to long-term contracts with mostly U.S.-based firms. In fact, it's likely counterproductive because domestic firms are being weakened at a time when research and development efforts are making steel a more viable option in future vehicle design by creating thinner and lighter steels.

Year-to-date imports are running 3% higher than 1998 and almost 17% higher than 1999, AISI points out. Imports from the Ukraine and China are up a whopping 177% and 161%, respectively. The average value of steel mill product imports is about $70 per ton, or 15.4% below first quarter 1998 levels. AISI Chairman Richard K. Riederer says the U.S. steel industry "is again approaching a crisis stage. And once again there are unsold steel imports piling up at U.S. ports."

And with the dollar strong and this country's relatively open market economy, there appears to be no short-term answer for steel companies and their supporters. Turning to lawmakers and the U.S International Trade Commission is a possibility, but that often results in a political standoff. And with the country in the midst of a tight presidential race, few, if any, expect groundbreaking action. Nevertheless, AISI is urging immediate government intervention.