July 26, 2000
Morrie Goodman/Pat Woodward, 202-482-4883
Report Outlines Comprehensive Strategy to Avoid Future Steel Crisis
--The Commerce Department today announced a comprehensive strategy
to guard against a recurrence of the 1998 steel crisis that took
a heavy toll on U.S. steel industry and their families. This program
was unveiled as part of a comprehensive report on the causes and
effects of the 1998 steel import crisis. Last year President Clinton
and Vice President Gore launched a Steel Action Program, which
called for Commerce to examine market-distorting trade barriers
and to develop a strategy to avoid similar crises in the future.
240-page Report to the President on Global Steel Trade: Structural
Problems and Future Solutions identifies numerous factors
that triggered the 1998 crisis, including the Asian financial
crisis and currency depreciations. It focuses on underlying long-term
structural factors in key foreign steel producing countries which
exacerbated the severity of the crisis. The Department of Commerce
concludes that the recovery of the domestic steel industry is
ongoing, and therefore, careful attention needs to be paid in
coming months to key indicators.
steel crisis signaled the need for vigilance and stepped-up efforts
to address the root causes of global instability in global steel
markets," said Commerce Secretary Norman Y. Mineta. "Free trade
and open markets have been the engines of our nation's economic
expansion, and we must ensure that our workers and businesses
are allowed to compete under fair terms. This Report sets out
a comprehensive strategy to eliminate practices that distort global
steel trade, and is designed to avoid a future steel trade crisis."
elements of the Strategy are:
warning of import surges and of changes in industry conditions.
Key steel trade data will continue to be released on
an expedited basis. Commerce will webcast information to steel
workers and producers.
relief for industries, workers, and communities when import
surges occur. Antidumping investigations will be expedited
and early critical circumstances determinations will allow for
the imposition of duties early in a case pending a final determination.
To address the impact of import surges on workers and communities,
the Administration has requested funding to establish an interagency
rapid response team.
to address the root causes of instability in global steel markets.
Working with other agencies, Commerce will continue
or initiate bilateral engagement with the major steel producing
countries. The focus will be on the long-term structural factors
that contributed to the speed and severity of the crisis.
is the product of an intensive year-long examination looking into
almost every aspect of the steel crisis. The Department of Commerce
analyzed relevant economic data and consulted with U.S. steel producers,
workers, and unions; foreign steel producers and their workers;
foreign governments and embassy officials; trading companies, steel
service centers, and other steel consumers; and a wide array of
industry experts. The complete report is available at trade.gov/media/steelreport726.htm
the international steel policy agenda. We will seek
broader international attention and sensitivity to steel trade
issues. This includes seeking a moratorium on Multilateral Development
Bank lending that expands global steel capacity and proposing
that the OECD Steel Committee address difficult issues such
as steel market reforms in Russia and Ukraine and the elimination
of formal and informal import barriers to steel around the world.
Factors that Triggered the Steel Import Crisis
Structural Factors that Contributed to the Crisis
1997-98 financial crisis was the immediate short-term event
that precipitated the steel import crisis. The financial crisis
resulted in lost steel consumption, sharp declines in real income
and depreciating currencies in Asia, Russia, and Latin America.
Combined with strong U.S. demand, this led to a flood of low-priced
imported steel into the U.S. market.
factors in key steel producing countries enabled them to sell
low-priced exports and forestall downsizing adjustments mandated
by the market. Examples include:
--The emergence of Russia as one of the world's top steel producers
was a significant factor leading up to the 1998 crisis. Russian
producers have been able to weather substantial downturn in
domestic market and turn increasingly to exports. This was due
in large part to Russian steel mills that bartered their products,
did not pay their bills and produced steel regardless of market
demand, much of which was sold for export at prices that did
not reflect a true market cost of production.
--The major structural problem is Japan's noncompetitive steel
market. Apparent coordination among major integrated steel producers
allows Japanese producers to charge high prices for their products
at home. Higher profits on domestic sales can be used to export
at low prices and weather downturns in the economy. In 1998
and 1999 the U.S. Department conducted antidumping investigations
on a variety of steel products from Japan. Antidumping margins
in these cases ranged from 18 percent to 67 percent for hot-rolled
steel, 32 percent to 65 percent for heavy structural steel,
and 37 percent to 58 percent for stainless cold-rolled sheet
--Unsoundbank lending practices were the most pronounced
structural issue in Korea. The financial difficulties of the
Korean steel industry as a whole in the 1990s can be traced
to over-borrowing to fund over-investment in under-performing
U.S. Steel Industry had Restructured
--Brazilian producers enjoy the advantage of a domestic market
insulated from full market competition. The Brazilian producers
are able to leverage the advantage of an insulated home market
to sell at low prices abroad.
1980s and early 1990s, the U.S. closed dozens of mills, cut capacity
by 30 percent, invested $50 billion in new technology, and raised
productivity by over 300 percent. During this time, the workforce
was reduced by 60 percent. The U.S. became a world leader in low-cost
of the Steel Crisis
imports in 1998 rose 33 percent above 1997, which at the time
had set a record for steel imports. Average prices for finished
steel products in the United States declined dramatically due
to a 20 percent reduction in the price of these imports. U.S.
steel plants, which were operating at over 90 percent capacity
in early 1998, fell below 75 percent by year-end.
1999 Steel Action Program Responds to Crisis
the height of the crisis, imports of finished steel products
garnered almost 35 percent of the U.S. market, up sharply from
their normal levels near 20 percent. The cost of this surge
in imports amounted to thousands of lost steel worker jobs and
contributed to six U.S. companies going bankrupt.
to the 1998 steel crisis, the Clinton Administration launched
a Steel Action Program. Its multi-pronged approach includes vigorous
enforcement of trade laws, bilateral efforts to address underlying
problems that led to the crisis, and improved import monitoring
the steel crisis began, the Commerce Department has strengthened
and expedited its steel-related antidumping duty investigations.
beginning of this year, U.S. steel mills had returned to producing
at about 90 percent of capacity. Domestic shipments of steel in
the first quarter of 2000 reached record levels, and first quarter
2000 earnings were up for most major steel companies. Significantly,
import penetration of the U.S. market for finished steel products
has returned to its historic norm of approximately 20 percent.
New Strategy for Continued Vigilance
prices have not rebounded and employment remains below pre-crisis
levels. While the steel crisis may almost be behind us, its
impact still remains.
Report underscores the need to recognize early warning signs
and take action, including engaging our trading partners. The
comprehensive strategy sets out a roadmap to achieve these important
goals: 1) Faster relief for industries, workers, and communities
when import surges occur; 2) Early warning of import surges
and of changes in industry conditions; 3) Steps to address the
root causes of instability in global steel markets; 4) A reinvigorated
the international steel policy agenda to gain broader international
attention and sensitivity to steel trade issues.
the industry's ongoing recovery is reflected in increased production
levels, imports for the first months of 2000 are on the rise.
Over the course of the next few months, the Administration will
watch carefully capacity utilization levels, steel prices, employment
levels, import penetration, and will take appropriate steps
to address ongoing concerns.