Steel trade case pits two powerful opponents against each other – Mittal against itself

In the past few days, a public hearing was conducted at the International Trade Commission (ITC) in Washington. The issue is the antidumping (ad) and countervailing duty (cvd) orders against six countries for corrosion resistant steel, a main staple for the automotive industry. These penalties, ranging from 2% - 39%, have been in effect since 1993, and the affected countries are: Australia, Canada, France, Germany, Japan and South Korea. Every year when the ITC goes through the process of the Sunset Review, the domestic steel makers object, claiming that they would inevitably be harmed again were the imports from these countries to resume. Unfortunately, the ITC as well as the Department of Commerce (DOC) almost routinely go along with the petitioners' request and keep the dumping orders in effect. But this year, the coddled steel industry has encountered serious opposition by an equally powerful industry – the automotive. Their case is very compelling. How long does the steel industry sector need this protection? Certainly, thirteen years must be an adequate time. Also, by shutting out a large chunk of the world market, US-made corrosion resistant steel remains pretty expensive. The US car manufacturers are in a tough competitive battle with a number if foreign car makers and cannot afford paying a premium on their raw material any longer. Big Steel is arguably the most protected industry in the US. In addition to the many dumping cases, since 1993, the US government has absorbed $9.0 billion or almost two-thirds of the steel industry's “legacy” costs (their private pension funds). The steel industry employs 130,000 people compared to more than 2.0 million jobs in the car industry. Finally, the profit margins for US steel mills have been very strong, easily exceeding the 5.5% margin for US durable goods in the first six months of 2006. Arguments have been fierce, and Mittal, the world's largest steel manufacturer, has experienced a kind of “civil war.” Their US operations are big players in the corrosion resistant steel market, and the recently acquired Arcelor unit produces this steel primarily in France, one of the affected countries and is arguing on the same side as the US car industry. A decision by the ITC is expected in December of this year.