Steel CEOs See Turnaround, Praise Tariffs

ByTonya Vinas Battle-scarred but optimistic, North American steel producers gathered in Chicago May 21 for a prelude to the annual meeting of the American Iron and Steel Institute (AISI), an association of 34 producers from the United States, Mexico and Canada. The general meeting opens May 22 at the Fairmont Hotel. At a pre-meeting media briefing, steel CEOs noted signs of a turnaround in the North American industry, which was suffering from falling prices even before the recent U.S. recession and has seen more than 30 bankruptcies since 1998. In response manufacturers have reduced production, and in March President George W. Bush enacted a package of tariffs on steel imports in response to complaints about unfair trade practices forcing prices down. Although steel imports to the U.S. are up 18% on the year, they dropped nearly 40% in March compared with February. "There's been a quick and significant turnaround in market conditions for North American steel producers," said John T. Mayberry, chairman and CEO of Dofasco Inc., Hamilton, Ontario, and chairman of the AISI. "Reduced capacity, trade actions against unfairly traded steel imports and increased demand have combined to allow for much-needed price restoration." Mayberry said U.S. spot market prices for hot-rolled steel orders for July delivery are being reported at about $100 per ton or more above November 2001 levels. This is 10% below spot-market pricing of two years ago, though, Mayberry said. Still, he and others stressed the improvements the industry has made. "Certainly the last six months have seen quite an improvement in this business," said Tom Usher, CEO of U.S. Steel Corp., Pittsburgh, and a vice chairman of AISI. "Facilities are running at much higher utilization rates than we were running in the fourth quarter, and there has been the beginning of some restoration of prices. We're still not back to the average price of the last 20 years, but there has been some restoration." Mayberry and others noted positive signs in some markets, such as residential housing, but said other markets such as non-residential construction remain weak. The steel leaders expect some of the weaker markets to begin bouncing back in the second half of 2002. Overall, Mayberry said, the North American steel industry is expected to grow 3% over 2001. Commenting on Section 201, Bush's controversial package of tariffs that has drawn harsh criticism from Europe and Japan, the CEOs said the actions are needed to prevent unfair trade practices such as non-NAFTA countries selling products through NAFTA countries. "I commend the president and the administration for doing the right thing," said Daniel R. DiMicco, president and CEO of Nucor Corp., Charlotte, N.C. "He's one of the few leaders in the world who truly understands that free trade means responsible rules-based trade." In terms of innovation, the CEOs spotlighted collaboration efforts with automakers to produce safer, fuel-saving steels and campaigns to increase steel usage in home and public works construction. "We're not sitting and twiddling our thumbs waiting for the economic upturn," Mayberry said.