Steel Imports Cause Low Utilization Rates According to Steel Mills

by Stuart Burns on May 13, 2009

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Reporting on a press interview at the AISI meeting in Phoenix, AZ, Purchasing.com relayed comments made by Nucor CEO DiMicco and others calling for trade agreements to be strictly enforced and threatening anti dumping on overseas steel suppliers.  The steel producers are claiming steel imports are a direct cause of the domestic industry’s low capacity utilization rates as if somehow the laws and trade agreements can be turned on and off at will to suit the domestic producers. The fact is imports have fallen in line with domestic producers utilization rates. According to US Census Bureau data, imports in the first quarter are running at half the level they were last year and March was the lowest level of the quarter suggesting volumes are falling. In times of high demand, remember just 12 months ago, domestic producers were not able to meet market demand and without imports the US industrial machine would have been starved of material ” to the detriment of the whole economy. Even as it was, steel consumers were placed on allocation as mills exported overseas to take advantage of better prices and the (at the time) cheap dollar.

If domestic producers cannot, or will not invest in sufficient capacity to meet all of the domestic market’s need they can have no objection to imports. While competition is rarely comfortable, the fact remains the needs of the US steel consumer is of greater importance than the needs of the US steel producers, if for no other reason than there are ten times (probably 100 times) as many jobs riding on the consumers. Recognizing the importance of having a structure that allows imports in normal and peak times you can’t object when demand drops. It’s true imports do divert some demand overseas but they also keep prices at world market prices and that benefits the US economy by allowing US manufacturers to continue to compete in the global market place.

–Stuart Burns

  • Anonymous

    “Steel Imports Cause Low Utilization Rates According to Steel Mills”

    We know that in Southern Ontario. US Steel is now importing steel instead of making it here. Imports have replaced production at two domestic mills and shut them down completely!

  • http://www.nucor.com Franky Griggs

    Mr. Burns:

    I am the General Manager of Nucor’s Birmingham, Alabama steel mill. I am writing to you in regards to the above mentioned article that you recently authored. Indeed, imports have fallen significantly as you report about 50%. Current domestic utilization rates are at about 40% and falling fast !!! Imports as a percent of domestic consumption are on the rise ! Laws and trade agreements are only important to the discussion when and only when they are enforced ! Just because we have trade laws in the U.S. doesn’t mean that our trading partners will play by the rules. As a matter of fact, our trade laws are so typically cumbersome, an industry has to be literally in the Grave before any trade action may be enacted. Just look at the steel industry over the last 25 years. More than 30% of U.S. steel making capacity went bankrupt within this time period. From 2005 through 2008 U.S. consumption of steel was ~130 Million tons/yr. U.S. steel making capacity during this time period was at ~110 Million tons. Why didn’t we build more capacity? There was, and still is, a global glut of steel making capacity, and China, the worlds trading partner is continuing to add capacity!! Are the Chinese much more productive than the U.S.? No !!! At Nucor, we produce ~3000 tons of steel per steel making employee, possibly the most productive steel company in the world! Just 12 months ago, the U.S. steel industry employed ~120,000 people. Does China produce steel cheaper than we can? Yes !! But only through significant government subsidization, currency manipulation, export tax rebates, import tariffs, less than life sustaining wage structures, lax environmental regulation enforcement, little concern for human safety¦.the list goes on and on. The Chinese spit in the face of their commitment to the WTO on a daily basis and threaten us with trade restrictions (HA HA¦.what a threat). How do we, the U.S. steel industry, justify capacity expansion in the U.S. when we will have to compete with other Governments that build industries on an export platform????? The only people with the gumption to add significant capacity in the U.S. are the Germans and the Russians!!!!!! This They do only because they have never operated in an economy as open as the U.S. economy !!! They will find out soon enough.

    By the way, there is no way that Nucor exported steel prior to having met our domestic customers’ needs first !!!!!!! That insinuation, I find, extremely insulting.

    p.s. without imports the US industrial machine would have been starved of material “ to the detriment of the whole economy ¦¦..that economy of which you speak was a false economy !! We might have seen fewer bankruptcies and less financial pain if this false economy had not been served by dumped imports !

    Kindest Regards

    Franky Griggs
    VP&GM

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