CITAC MEMBERS TELL HOUSE COMMITTEE STEEL SHORTAGES, SKY-HIGH PRICE INCREASES DEVASTATING TO U.S. MANUFACTURERS
"This is an impossible way to operate a small business."
Washington, DC - Member companies of The Consuming Industries Trade Action Coalition (CITAC) testified today in a House Small Business Committee hearing about the harm to U.S. manufacturers caused by the 201 steel tariff imposed by the Bush Administration in March. The 30% steel tariffs have resulted in steel shortages and massive price increases.
Small business executives and union representatives Lester Trilla and Gordon Jones of Trilla Steel Drum Corporation, John Grove of Cold Metal Products, Dave Pritchard and Robert Herrman of A.J. Rose Manufacturing, Merle Emery of GR Spring & Stamping, Michael Tanner of Wren Industries, and Mike Nelson of Arnold Engineering described to Chairman Don Manzullo (R-IN) and other members of the Committee the frustrating, time-consuming and often fruitless process of finding a steady supply of steel.
The "Hearing on Unintended Consequences of Increased Steel Tariffs on American Manufacturers," began with testimony from economist Laura Baughman, President, Trade Partnership Worldwide. According to Baughman, steel-using companies created 1.2 million American jobs over the last six years and the workers they employ (almost 13 million) "outnumber steel industry workers by 59 to one."
Small steel users compete with manufacturers all over the globe, Baughman continued, and therefore are directly affected by price and supply changes. To maintain competitiveness, "steel consumers must have steady and reliable sources of steel&often on a just-in-time basis." These companies are also highly sensitive to price change. "Steel consumers cannot operate profitably in a market where steel suppliers cannot tell them what the steel they order will cost," Baughman stated.
Executives of steel-using companies confirmed Baughman's testimony with detailed evidence from their businesses. Merle Emery, Vice President and General Mangaer of GR Spring & Stamping of Grand Rapids, Michigan, faced with contracts broken by service centers, has been forced into the spot market, increasing his price of steel by 20 to 30%. As a result, GR Spring lost a $4.5 million contract with a well-established customer. A Canadian company, unaffected by the 201 tariffs, won the business. "This contract was huge for us, but we could not compete on price due to increased steel costs," testified Emery.
Emery stated that an even more troublesome price problem is lack of certainty. Service centers will not price steel more than a month in advance. "This means that we have to guess what our steel costs will be when we calculate a price for our customers. This is an impossible way to operate a small business."
John Grove, Vice President for Procurement at Cold Metal Products in Swickley, Pennsylvania, described how three long-time suppliers - WCI Steel, Steel Dynamics and Gallatin Steel - had put his company on allocation. When Cold Metal does receive steel, it arrives late fifty percent of the time.
In addition to an uncertain supply, Cold Metal has seen price increases of $130 per ton. This "constitutes more than a thirty percent price increase and the largest increase in a six-month time span ever seen by Cold Metal since its founding in 1926," stated Grove. As a result, Cold Metal is losing business to producers in the United Kingdom and China.
Michael Tanner of Wren Industries testified that he has received deliveries a month or more late, and as a result, has almost forced his customers - automotive companies - to shut down production lines. Wren, a metal stamper located in Tipp City, Ohio, is a tier 1 and 2 supplier of parts for the automotive industry. "That would be catastrophic for our reputation and credibility&all because we could not get the steel we need on time," he said.
Pointing to the damage done by price gauging, Tanner stated, "Our service center provider that supplies 25% of our steel requirements increased the price of delivered steel by as much as 48% despite our contract. We had relied on these contracts &and based our pricing to our own customers accordingly." Tanner, like other witnesses, said the price increases are not acceptable to his customers.
Three of the six companies represented at the hearing employ members of the United Steel Workers unions. Robert Herrman, a machine technician and union member at A.J. Rose Manufacturing headquartered in Avon, Ohio, said he is concerned about lost business resulting from 201 tariff effects and what it will mean for wages and jobs. "The steel tariffs were supposed to protect American businesses and save American jobs. So why do the steel mills deserve to stay in business more than A.J. Rose."
Dave Pritchard, President and CEO of A.J. Rose confirmed Herrman's assessment, saying he has been contacted by a number of customers who have either already chosen new suppliers in Brazil and Asia or are in the process of "market testing," meaning they are trying to find a lower cost supplier.
Trilla Steel Drum from Chicago, Illinois also employs union workers. Gordon Jones, a drum loader at Trilla and member of a local union, said he and other workers are losing out. Overtime is down and without resolution, Jones, a father of six, sees less work and less pay ahead. The tariffs concerning his family and fellow union members at Trilla "have nothing to do with steel drums, this company or my family&I don't understand why the union jobs of steel producers are any more important than my union job."
As President Lester Trilla described, 201 tariffs and looming antidumping cases on cold-rolled steel, have virtually cut off imports of the steel he uses to make 55-gallon steel drums. Trilla previously used domestic steel, but made a switch to imports, finding that "only imported steel consistently meets our exacting requirements and those of our customers." Now, forced to rely on domestic steel suppliers, not only has Trilla's cost increased more than 54%, but in addition, when the added costs of using different material in the production process (scrap, breakdowns and rejected drums) are figured in, Trilla is losing even more.
Chairman Manzullo invited steel users to testify before the Committee after receiving more than a hundred letters from downstream users suffering serious dislocations from the Bush Administration's 201tariff decision.
Jon Jenson, CITAC's Chairman, applauded Manzullo's efforts, stating, "Congressman Manzullo understands where we are coming from. These companies aren't going to wait for massive layoffs and bankruptcies to bring their stories to Washington. Until March, they were successful competitive businesses. Today, they are sitting in a Congressional hearing room instead of running those businesses because the Administration's steel policy is making life impossible for them."
According to Jenson, the current U.S. steel trade policy is even more distressing because, "we can have it all - a healthy steel industry, successful downstream companies and good trading relationships. But we won't achieve any of those goals through tariffs."