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MAHONING VALLEY Steel companies are mixed over tariff proposal



Published: Sun, February 24, 2002 @ 12:00 a.m.



One company says the proposal doesn't go far enough, but others say it's not needed.

By CYNTHIA VINARSKY

VINDICATOR BUSINESS WRITER

Does Big Steel deserve a big break?

The answer seems obvious to some steelmakers, such as WCI Steel in Warren.

They say their companies and the American steel industry in general need protection from cut-rate foreign steel to recover from a crisis that has forced 31 domestic steelmakers into bankruptcy since 1997.

But an International Trade Commission proposal to slap hefty tariffs on imported steel is drawing mixed reactions from other Mahoning and Shenango valley companies working in the steel industry.

The Bush administration has until March 9 to act on the ITC recommendation of up to 20 percent tariffs on some categories of foreign steel for four years, with the percentages to decrease gradually each year.

The commission made the proposal in December after its investigation showed that cheap imports had caused significant harm to 12 out of 33 different steel product categories.

President Bush could accept the ITC plan, but he also has the right to alter it or drop it. Major steelmakers and the United Steelworkers of America are pushing for higher tariffs of 40 to 50 percent.

Support: WCI Steel, the region's only remaining integrated steel producer and its largest steel employer with a work force of 2,000, is taking three busloads of supporters to Washington next week to rally for the trade protection plan.

Tim Roberts, a WCI spokesman, said major steelmakers do not believe the ITC's 20 percent recommendation would be enough to stop foreign steelmakers from dumping their product in the U.S., sometimes for less than the cost it takes to make it. Steel prices in the U.S. now are at all-time record lows, he said.

WCI has managed to survive an industry-wide steel crisis, officials say, only because it had a healthy line of credit and a rainy day fund to fall back on. Still, the company lost $100.8 million in its fiscal 2001, its first losing year since it started operations in 1988.

"All we're looking for is a level playing field," Roberts said. "The steel industry is pushing for 40 percent tariffs across the board. If we don't get it, we'll see imports flooding in again, and the steel industry will be in very serious trouble."

Concern: On the other hand, Thomas Steel Strip, a Warren steel processor, is watching the ITC proposal with concern.

Owned by Corus Group PLC, Britain's biggest steelmaker, Thomas Steel Strip has filed papers asking that the special flat rolled steel it uses for battery casings be exempted from any tariffs. About two-thirds of its business comes from the household battery industry.

Flat rolled steel is one of the categories the ITC found was damaged by imports, but Stephen Wilkes, marketing director, said Thomas must buy its specialized flat rolled battery steel from the Netherlands because there is no domestic equivalent available.

If a tariff is imposed on the metal, called battery quality hot band or BQHB, it would have a "significant negative impact" on Thomas Steel Strip's battery business, he said.

The company, which employs about 500 in Trumbull County, has the support of several large battery makers, including Ray-O-Vac, Duracell and Energizer, in its plea for a tariff exception. "Our position is evidence of the fact that there are good imports and bad imports," Wilkes said.

Worried about changes: Wheatland Tube supports the tariff proposal but has serious concerns about what changes the Bush administration might make.

A producer of welded pipe and tube, Wheatland employs about 600 in Wheatland and is looking to buy several AK Steel plants in the area. Mark Magno, vice president of marketing, said the company would be hurt if the government fails to impose equal tariffs on both flat rolled steel and welded tubes and pipes.

"It's a huge issue for our industry and for our company," Magno said. "If they impose tariffs on flat rolled and not on tube and pipe, importers could just direct the flat rolled to a pipe producer as a way to get around the tariffs."

Magno said the pipe and tube industry has been battling foreign competition since the mid-1980s -- imports have about half the market share.

The ITC's proposal calls for companies benefiting from the tariffs to reinvest some of their savings into their businesses, a stipulation which he expects will result in a stronger domestic industry in the long run.

No benefit: North Star Steel's Youngstown plant won't benefit from the proposed tariffs, said plant manager Jim Cowan, because the seamless pipe it makes is not one of the categories the ITC found in need of trade protection. "I don't agree," he said.

North Star was doing well a year ago when other steel companies were struggling because the gas and oil well industry it serves was riding high, but low gas prices and an unusually warm winter have taken their toll.

Cowan said the local plant is running at 50 percent of capacity and demand for its product is low, but he expects to see improvement by the end of the second quarter. He said the facility employs 488.

The tariffs would help some of North Star's other plants producing flat-rolled steel, steel rods and steel bars in Michigan, Kentucky, Minnesota, Arizona and Iowa.

McDonald Steel, a steel shape producer operating in the former U.S. Steel McDonald Works in Trumbull County, will not benefit if the ITC recommendations take effect, a spokesman said, even though it constantly battles foreign competition.

Concern: The trade commission is concerned mostly with steel produced in huge quantities, said McDonald Steel spokesman Bill Farragher -- steel shapes is a much smaller market. He said the company has been working to stay competitive by reducing overtime, increasing productivity and marketing its products worldwide.

"You know where we should be, if we want a level playing field?" Farragher argued.

"We should be down at the United Nations, not in Washington, and we should be trying to get rid of all tariffs. If I had one message for businesses, even if they're five times our size, I'd say: Stop hiding behind a wall of tariffs, get your act together and sell your product overseas. That's where the future is."

HM Steel in Niles won't be affected by the tariff plan, said manager Jim Mazzoni, because the company edges, decoils and slits steel that has already been purchased by its customers.

Mazzoni, who was a manager at the CSC Ltd. steel mill in Warren before it went bankrupt, said he personally favors tariffs as a way to help the steel industry get back on track.

Hynes Industries president Bill Bresnahan said he favors trade protection for steel, even though it won't help the Austintown company steel processor and will likely increase its costs. The company has about 185 employees.

Bresnahan said he believes it is in the national interest to have a strong steel industry. "I'm not flag-waving, but we don't want to find ourselves depending on other countries for steel like we do now for oil," he said.

Besides, he said, the company prefers to work with domestic suppliers, rather than foreign steelmakers, because they tend to be more responsive, delivery is quicker and problems are solved more quickly.

On the down side, tariffs would increase the overall price of steel, and that would affect Hynes' expenses. The company buys steel, processes it and sells the finished product to customers. "It's not a black and white issue," he said of the tariff plan. "It's a mixed bag."

vinarsky@vindy.com




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