Domestic Steelmakers are Strong, But Concerned

April 12, 2012
Confusion on energy, trade, regulation, and infrastructure frames AISIs 2012 public policy agenda

The U.S. steel industry is bullish on the progress and trajectory of the manufacturing sector, but its leaders would like some help keeping it going.

In a Wednesday conference call, United States Steel Corp. (IW 500/60) Chairman and CEO John Surma and American Iron and Steel Institute president and CEO Thomas Gibson presented the AISIs 2012 public-policy priorities, heavily emphasizing the ways economic growth is impeded by specific federal actions, and inaction.

Surma, who is the current chairman of AISI, the primary steel industrys trade association, began the presentation by noting a recent economic analysis from University of Wyoming Professor Timothy Considine, whose specialty is energy economics.

That report concluded domestic steelmakers are playing a significant role in the manufacturing sectors post-recession resurgence because of its high degree of interrelation with other economic sectors.

Surma pointed to the energy, construction, and transportation sectors as examples of the impact domestic steel has had on the manufacturing rebound.

Every one job in the U.S. steel industry supports seven jobs in the U.S. economy, reflecting its ripple effect on employment, Considine wrote, and Surma reiterated.

The report found that in 2011, the domestic steel industry directly employed 150,700 people and thanks to its multiplier supported at least 1,022,009 jobs.

Surma emphasized that domestic steelmakers contributed more than $101 billion to the U.S. economy. Purchases of raw materials, energy, and supplies, are stimulating economic growth and employment on a wide scale, he said.

However, the U.S. Steel chairman stressed the need for the federal government to take steps that would establish more certainty in the economic outlook. He listed several factors inhibiting economic growth: burdensome corporate tax rates, uncertain energy costs, inadequate infrastructure investments, increasing regulatory burdens, and foreign unfair trade practices.

These are not new issues, Surma noted, but he emphasized that the need to address them is, for domestic steelmakers, very, very immediate.

Steelmakers are prepared to capitalize on the U.S.s abundant and available supply of energy resources -- notably shale oil, he said -- but those opportunities are limited by federal regulatory policies. The delayed Keystone XL Pipeline project was cited as a singular example of this situation.

Surma also said rebuilding the U.S. transportation infrastructure should become a top national priority. And, he stated that any tax-reform initiative must proceed from an objective of strengthening the U.S. industrial base by reducing the overall tax burden on manufacturers.

This is an essential issue that AISI is actively discussing with members of Congress, Surma said.

With manufacturing leading the nation out of the recession, the time is right for tax reform, he said, considering that the U.S. now has the highest corporate tax rate of any industrialized nation in the world.

Surma described the investments that domestic steelmakers have made since 1990 to reduce their operations energy-intensity (-27% per ton of steel produced) and CO2 emissions (-33% per ton of steel shipped).

Despite these advances, the federal regulatory agencies, especially U.S. EPA, have been aggressive, he asserted.

We urge the administration to take a step back and delay, revisit, and revise, some of these new rules, so that we dont make ourselves uncompetitive in the global marketplace, Surma said. Some of these rules are actually counter-productive, and would actually increase energy cost uncertainties with little or no environmental benefit.

The example he cited is the Industrial Boiler MACT Rule that in current form, he said, could force coke producers to flair coke-oven gas rather than recover and use it in the industrial process -- a common arrangement in those operations.

Surma said the rule would make it cheaper to flair the gas than to comply with the new regulation, and then to buy natural gas as an alternative to coke oven gas, though this would result in no additional environmental benefit.

Returning to the earlier point of energy uncertainty, and relating it to the regulatory uncertainty, Surma said the AISIs position is that individual states are in a much better position to manage regulations governing hydraulic fracturing for natural gas drilling. Fracking is a market with considerable economic opportunity for steelmakers.

Federal agencies should recognize this, he said, and avoid adding new layers of inefficiency and cost that could harm our competitiveness.

Surma concluded his list of objectives by calling for a more effective U.S. trade policy to combat foreign unfair trade practices.

He said this matter is one of particular importance to our AISI policy agenda. Chinas export-protection policies and currency-devaluing practices were his primary example of the ways that international trade injures domestic manufacturing.

Gibson said the AISIs legislative priority would begin with its desire for a resolution to the federal surface transportation authorization bill. The so-called highway bill has been delayed nine times by the U.S. House of Representatives, reportedly because of disagreement between the House Republican leadership and its Caucus.

Congress has not agreed on a new transportation-infrastructure funding bill since a six-year program expired in 2009. The U.S Senate passed a new version last month to provide two years of funding, but House efforts to pass a longer-term bill are stalled and so no compromise bill is possible. The impasse forced the House to pass its ninth temporary extension of the old law before its current two-week recess.

The extension of funding will last 90 days. Gibson and Surma both expressed understanding for the budget-cutting priorities of some Republican House members who are widely considered the obstacles to a new six-year bill.

However, Gibson said the AISI would accept the short-term certainty of two years of funding provided by the Senate version of the bill, rather than a tenth extension of the 2009 program that provides no strategic outlook for steelmakers and other manufacturers.

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