Section 201 Tariff Remedies Have Harmed U.S. Steel Consuming Manufacturers
Market conditions in the U.S. have worsened considerably for steel using manufacturers since the steel import restrictions were imposed in March 2002. These conditions are clearly due, at least in part, to the steel 201 tariffs.
Steel prices in the U.S. have dramatically increased.
Prices of benchmark steel products (especially flat-rolled prices) have soared 30 to 50% this year-far more than domestic producers predicted during the Section 201 investigation. The Section 201 tariffs have greatly exacerbated the situation.
U.S. steel producers cannot meet domestic demand for steel.
U.S. steel producers have broken contracts with U.S. steel consumers, put their long-standing customers on allocation, and have turned away new business. As a result, a number of steel consumers report that they will run out of steel before the end of July.
U.S. steel consumers are being forced into the volatile spot market.
The fact that U.S. steel producers are reneging on firm contracts with U.S. consuming industries means that purchasers are forced into the volatile spot market, which is being buffeted by huge price increases. As a result, steel consumers have experienced greater price increases, as well as greater uncertainty in supply.
U.S. steel using manufacturers cannot count on reliable steel supplies at globally competitive prices.
Many U.S. steel-consuming industries will run out of current steel availability by the end of July and they have no assurance that they will be able to obtain new steel supplies after that date. Even if companies are fortunate enough to obtain steel, they have no idea whether they can get steel they need at globally competitive prices, because steel producers are refusing to make advance commitments regarding pricing. Steel consumers cannot commit to pricing or availability for their customers, which in turn is leading customers to look offshore for their steel-containing products.
The Section 201 remedy is harming the international competitiveness of U.S. steel-using industries.
Steel prices have gone up in several global markets, but not as much as the U.S. As a result, the price for steel in the U.S. greatly exceeds the price in foreign markets. The gap is widening. Steel consumers have lost business to foreign competition that has a built-in cost advantage and will continue to do so as customers look to foreign suppliers as a way to control costs. Jobs of American workers are at risk.
Steel Consuming Industries Answer the Steel Lobby on Market Conditions
1. The 201 tariffs clearly play a role in the deterioration of market conditions and price increases.
Steel price increases since March 5 are the result of a variety of factors; clearly, the tariffs of up to 30 percent are partially responsible. The tariffs are a calculated effort to restrict supply and increase domestic and import prices for steel. They have succeeded beyond all expectations: prices are 50 percent and more above pre-201 levels. It is inherently incredible to contend, as the Steel Lobby does, that the tariffs played no role in scarcity of steel and price increases.
2. Steel using manufacturers are being hurt by steel shortages and price increases.
It is also indisputable that higher prices and shortages are harmful to companies that rely on steel for manufacturing. Companies that cannot pass on higher prices to their customers face a significant hit to their bottom line. Even those that can pass on a portion of the price increases may be unable to increase prices enough to cover costs. These companies will at least lose profits, and many will lose sales and jobs. Businesses will be threatened with extinction if these conditions persist.
3. Product exclusions offer some help for steel consuming businesses.
Steel using manufacturers support product exclusions for steel that they cannot obtain on practical terms either because of delivery, specifications, price or qualifying source. If steel is unavailable for any of these reasons, there is no justification for denying a product exclusion. Exclusions are needed by many companies, not just those that have filed requests. Clearly, the exclusions provided so far are insufficient to help all the companies that need steel on time and at globally competitive prices.
4. The Steel Lobby isn't complaining now that prices are skyrocketing.
In an act of supreme chutzpah, the Steel Lobby contends that customers should keep quiet when prices are unsustainably high. In fact, it is the market that sets, and should set, prices. When government interferes with the market, serious dislocations result. That is happening now in the steel market. It would be extraordinary indeed if such direct interference did not cause dislocations. The question is whether this interference is doing more harm than good. In our view, it clearly is.