Tag: American Iron & Steel Institute

AISI: Global Community Must Come Together Against Steel Overcapacity

[caption id="attachment_81527" align="alignleft" width="180"]AISI_kevin_dempsey-testimony_180_102116 Kevin Dempsey, AISI.[/caption]

MetalMiner Managing Editor Taras Berezowsky recently sat down with Kevin Dempsey, Senior VP for public policy at the American Iron & Steel Institute. Dempsey leads the AISI public policy team representing the interests of North American steel producers and also serves as General Counsel to the Institute. Before that he was a practicing attorney who specialized in trade matters.

During his years on Capitol Hill and in the private sector, Dempsey has worked extensively on international trade negotiations, including the Doha Development Agenda and the original negotiations on the accession of China to the World Trade Organization. He also has considerable experience with U.S. and international law related to subsidies, trade remedies, market access, intellectual property rights, and product standards, as well as U.S. legislative procedures for authorizing and implementing trade agreements.

This is part three of their discussion. Read part one and pick up where we left off in part two for more on the U.S., China, steel and trade matters.

Kevin Dempsey: I’m not a believer that there’s a WTO case that’s going to solve all of this problem, either, but there may be aspects of the Chinese system that can be addressed. We have successfully brought several WTO cases against China for restrictions they’ve placed on the export of raw materials.

It’s another way in which they subsidize their domestic steel producers. They restricted the export, for instance, of coking coal, which had the effect of lowering the price for their domestic producers and raising the price on the world markets for everybody else. That was a violation of their WTO commitment, so we took them into WTO and we succeeded in that the WTO changed that policy. It’s going to require firing on all cylinders and pressing on all these fronts because it’s not just one single thing in China, it’s this whole range of government policies that are at play.

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So, we have to press on enforcing our trade laws, getting our allies to enforce their trade laws. Enforce, really, at every chance we get. If there’s a WTO violation to push China to address that. But then keep pressing through international forums to get China to make the necessary economic reforms domestically and get out of the steel business.

Well let’s say one of the things we have going for us compared to previous disputes that we’ve had if we went back to the 80s with Japan or others where it was basically a bilateral dispute. With a dispute with China over this steel issue, it is not a bilateral U.S.-China issue. We have equally the support of the government and the industry in Japan, in Europe, in Latin America. This truly is a global phenomenon, and that’s why you’ve seen both of the G7 statements earlier back in May about the need to address market-distorting practices by governments that lead to steel overcapacity. Then importantly, at the G20 meeting which was actually held in China over Labor Day weekend…

Taras Berezowsky: That’s a really great point about just having that coalition of other nations behind the U.S. Just two more things, Kevin. On the federal government front here, I’ve heard from certain corners that the International Trade Commission and U.S. Commerce Department and all these various agencies at play have had such trouble with enforcement because either they’re under-resourced, understaffed, what have you, they don’t have the time for this kind of stuff. Is that consistent with what you know and what you guys are seeing and hearing?

KD: Well, there’s no doubt that in the last two calendar years, 2014 and 2015, I think we saw record levels of anti-dumping and countervailing duties cases filed at the Commerce Department, the ITC, many of those were on steel but not all of them, but there were a huge number of steel cases, for instance last year.

The Commerce Department was looking at a situation where they were at a 10- or 15-year high in terms of trade cases, but they had only two-thirds the number of analysts that they had had 10 years ago. There were some resource constraints. We did get, in the last round of appropriations last year, we did get the Congress to appropriate more money for the Commerce Department for the particular agency, the part of enforcement and compliance within the International Trade Administration, and I think that has helped and they are staffing up.

They are hiring a number of new people, so I think that helps. We continue to press in our efforts with the government to continue to see increased funding levels for enforcement at the Commerce Department and to make sure that within the broad range of issues that the Commerce Department has to address that the congress identifies trade law enforcement as a top priority issue.

I will say we have a lot of support on the hill, in the congress from members of both political parties on that issue. I think that will continue to be an issue but I think we are getting the additional resources, and we continue to make that a priority going forward.

TB: How do you see this whole MES bid playing out? How do you see it playing out kind of either in the shorter term when this December 11th date passes as far as whatever is in the WTO language or longer term if it’s going to drag out the appeal process? How do you see the end game with the market economy status bid from China?

KD: That’s a good question. If you’d asked me a couple years ago, we were worried we would would see in response to the pressure from China the government starting to just change their laws in advance of the end of this year out of fear of some dispute with China.

I think we’ve made a lot of progress in that we’ve persuaded a number of governments, so many led by the U.S. government that’s been quite strong on it, that China does not deserve some automatic granting of market economy status. We won’t see any change overnight in the United States. I don’t think we’ll see a change in Canada, or in Mexico, or a number of other countries. I think we’ll see China continue to be treated as a non-market economy after December 11th. I suspect there’ll be some complaints raised about that under our system.

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China always has the right under U.S. law to come in in a particular trade case and say, ‘hey, the facts have changed and we’ve proved that we’re now a market economy’ and they’re free to do that. I don’t think the facts will support them, so I expect at some point they’ll try to make that case. I don’t think they’ll be successful. Then we expect that, at some point, the Chinese will try to challenge that in another forum, perhaps at the WTO.

Maybe we’ll see a WTO dispute that comes out of that. That’s going to take some time to play out. A normal WTO case takes at least a year and a half. Frankly, the WTO has a back log of cases right now themselves with limited resources, so it could take longer. This will also play out not only in the U.S., but in other countries. We’re very focused not only on what’s happening in the U.S. but what’s happening around the world. We’ll have to see. We’re sort of the first test case, but I think this issue is going to continue well into next year at the very least.

AISI: Chinese State-Owned Enterprises Need to Change

[caption id="attachment_81527" align="alignleft" width="180"]AISI_kevin_dempsey-testimony_180_102116 Kevin Dempsey, AISI.[/caption]

MetalMiner Managing Editor Taras Berezowsky recently sat down with Kevin Dempsey, Senior VP for public policy at the American Iron & Steel Institute. Dempsey leads the AISI public policy team representing the interests of North American steel producers and also serves as General Counsel to the Institute. Before that he was a practicing attorney who specialized in trade matters.

During his years on Capitol Hill and in the private sector, Dempsey has worked extensively on international trade negotiations, including the Doha Development Agenda and the original negotiations on the accession of China to the World Trade Organization. He also has considerable experience with U.S. and international law related to subsidies, trade remedies, market access, intellectual property rights, and product standards, as well as U.S. legislative procedures for authorizing and implementing trade agreements.

This is part two of their discussion. Read part one for more on the U.S., China, steel and trade matters. Today’s piece examines the role of international diplomacy and even the WTO.

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Taras Berezowsky: If you could pick one of those big issues or pieces of control what would be the biggest one as far as AISI and the whole industry domestically is concerned about? Is there one pet issue that trickles down to everything else?

Kevin Dempsey: Well, for steel I think you have to say if you’re in the steel industry the biggest issue is Chinese state ownership and control of its steel industry.

Because that is at the heart of the distortions that we see in our sector in terms of the massive overcapacity of steel in China that is leading to huge levels of exports of Chinese steel around the world.

A lot of that is being driven by the fact that these Chinese entities do not respond to drops in demand the way a market industry would. A private company or private industry, when it sees a demand for its product drop and capacity utilization drops very low, the need to make a profit forces a private company to shut down operations and cut back.

Unfortunately, what we’ve seen with China is even as Chinese steel demand peaked in 2013 — and has been dropping since then — the amount of Chinese capacity in the steel sector has actually continued to increase. Whether their excess capacity, it just continues to grow, and they seek to deal with that by simply continuing overproduction and trying to export all the excess production onto world markets… that’s leading to surges in imports into the U.S. as well as a lot of Chinese steel that goes to third countries, it’s overwhelmed those markets and then leads those markets to try to further process and reexport that excess steel production to the U.S.

It affects us in terms of not only direct imports from China, but also imports from third countries where Chinese steel is basically being indirectly shipped to us through third countries.

So, state ownership — and a lot of that’s at a provincial level where even if the central government in China says, “We’d like to reduce our excess capacity,” but because a lot of these steel companies are run at the provincial level, they can’t. Each province will say, “Well we don’t want to see the economic pain in our province.” Somebody else should reduce the capacity. Then, that further complicates the ability of the Chinese government to respond at all even to pressure from other governments to reduce its overcapacity.

TB: This has been a big question on my mind and, obviously, there are many tools at play — and have been at play for some time — that the U.S. government uses in terms of trade law and regulation and how the WTO can come into it, but do you foresee a specific kind of tool outside of the traditional anti-dumping and countervailing duty cases and everything that AISI has been at the forefront fighting for? Anything outside of that that would get China to change besides trying to figure out how to deal with tariff schedules and tariff systems?

How can we see them ever stopping the SOE bandwagon? Is there an end game there? How could we get our government to do anything?

KD: Well, yeah, it’s a difficult problem and it’s complex. There’s no single silver bullet here. It requires action on many levels. One, the U.S. government has to continue to fully enforce, aggressively, the trade laws against dumping and countervailing duties, against dumping and subsidies, that is against China and against other countries that do it because that’s the one thing that provides some immediate relief in our market from our domestic producers.

We have to stay firm on that, but that alone is not going to be enough. We have to also work closely with our allies in other countries because this is a global problem. China is exporting this excess production to many markets around the world, so we need to work with our allies to make sure they’re enforcing their trade laws as well so there’s no easy way out for the Chinese.

Then, we need to keep the pressure on through other channels like the G7 and the G20 with the highest levels of government via government-to-government discussions. Continue to put pressure on China to make reforms and to make the case that it’s necessary, because if they want to be a full and active and responsible member of the international community, they need to reform the aspects of their government policies that are leading to these global trade distortions. Then we need to look for every other tool that’s available.

You mentioned the WTO. I’m not a believer that there’s a WTO case that’s going to solve all of this problem, either, but there may be aspects of the Chinese system that can be addressed. We have successfully brought several WTO cases against China for restrictions they’ve placed on the export of raw materials.

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A Special MetalMiner Project: Learn why China getting market economy status may just be the biggest trade issue of our time – and how it impacts the U.S. aluminum industry – in “China vs. the World.

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Week-In-Review: Steel Fights Back! BHP, Vale In Damage Control Mode

Week-In-Review: Steel Fights Back! BHP, Vale In Damage Control Mode

This week started with the horrible Samarco mine disaster in Brazil. Two mine dams burst and waste from tailings ponds created to service the iron ore mine flooded local villages and affected water supply within a 60-plus-mile area. The death toll has now reached eight people.

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My colleague, Stuart Burns, warned that the co-owners of the mine, BHP Billiton and Vale SA, could be in deeper water than anyone. Remember BP after the oil spill?

BHP CEO Andrew Mackenzie hopped the first flight to Brazil to put as best a face as he can on the response. Yet the Brazilian government has already set its sights on Vale and BHP as the responsible parties and literal owners of the disaster.

“If federal fines are applicable, we will apply them,” Environment Minister Izabella Teixeira told reporters. “There will be punishment, and under Brazilian law the environment has to be repaired.”

I don’t know what could be a better incentive to manage your mine waste properly than that.

Essar in… Minnesota?

Speaking or iron ore, Essar Steel is supposedly on track to produce iron ore pellets in Minnesota’s iron range. Minnesota? Seriously? Production? In the US?

[caption id="attachment_74962" align="aligncenter" width="550"]Minnesota Iron Ore Ship Loader Iron ore ship loader in Minnesota. Could Essar Steel’s production facility revive the iron range? Source: Johnsroad7/Adobe Stock[/caption]

It’s all true. Essar received about $70 million in state grants and state loans after taking on the challenge in 2007 to build one of Minnesota’s only integrated taconite and steel mills. It’s been a star-crossed project, with many starts and stops since then but, supposedly, the taconite facility will be opening in early 2016.

We’ve often lamented the permitting hurdles that must be overcome to mine in the US but, and this is if it really opens next year, it will have taken Essar only eight years and a few months from approval to production. A relative fast turnaround for a US mine. Finally, a mining company has hopped, skipped and jumped through the complicated local, state and federal regulatory process.

Who would have a problem with this?

Clliffs Natural Resources, that’s who. Cliffs is the other major producer of iron ore here in the states. Cliffs and other Minnesota producers such as U.S. Steel, Magnetation, and Steel Dynamics laid off workers there when they were faced with low iron ore prices over the last two years, and that’s not even mentioning competition from cheaper steel imports from China into the US. More production means continued low prices to Cliffs.

Well, it IS looking there’ll be less production in Brazil for the foreseeable future. For good reason.

Steel Still Under Pressure

Meanwhile, the American Iron & Steel Institute released a new study by economists from the US, Canada that said giving China “market economy” status from the World Trade Organization would would “severely damage the NAFTA steel industries and harm NAFTA economies.”

The AISI also hosted a conference call to tell reporters how efforts to secure greater protections from cheap steel imports, particularly those from China, are going. While the conference generally followed up the study, new dumping measures enacted last summer and pending legislation, one interesting argument that came out of it was what, exactly, is a market economy and why can’t China just “graduate” to being one? Yeah, it’s not like showing up for class and getting Cs long enough to move on.

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“We don’t believe [Market Economy Status] happens automatically,” said AISI president Thomas J. Gibson. “Under US law there are criteria, six, by which China’s status as a market economy should be judged. And we are just drawing the US government’s attention to that and asserting that China should not become a market economy.”

Nucor CEO John Ferriola took that a bit further.

“80 to 90% of the Chinese steel industry is either owned or strongly supported by the government,” Ferriola said. “When I see China, I see a company masquerading as a country that’s waging economic war on, at least the US, but also every country in the world.”

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