American steelmakers to press Washington for quotas on imports
New York — This is a rusty moment in time for the American steel industry.
Mills are running at less than 50 percent of capacity. Some 128,000 workers - representing 30 percent of the industry's work force - are either laid off or on short-time. And foreign steel now makes up 16.5 percent of the US market.
Faced with this grim set of statistics, the US steel industry, meeting this week for the annual general meeting of the American Iron and Steel Institute, the industry's trade association, has asked Washington for help. The institute's membership will press federal officials to impose import quotas.
It did not rule out voluntary cutbacks by foreign suppliers, however, much as the Japanese have already done in both autos and steel (though the steel cutbacks are not enough, the industry maintains). In either case, as Howard M. Love, chairman of National Steel Corporation, noted, ''Imports are the most critical problem facing the domestic steel industry today.'' Countries considered unfairly trading steel include Brazil, Japan, and Belgium.
Steel is not alone in feeling the import squeeze. Autos and aluminum, for example, are both losing market share to importers. Joseph Wyman, an analyst with Shearson/American Express, comments, ''The US steel industry is a mirror of what is happening in US basic industries.''
David Roderick, chairman of US Steel, the largest American steel company, says there is a need for immediate government-to-government consultations, but he added, ''If the solution is unsatisfactory, there might be a need for a legislative solution.''
In Washington, in fact, a new group called the ''steel beetles,'' composed of many of the 126 members of the congressional steel caucus, said they would consider exchanging their votes on the budget in return for the setting of quotas on steel imports. One congressman, Rep. Austin Murphy (D), of Pennsylvania, said he got the idea when President Reagan imposed sugar import quotas May 4. ''He did it for sugar, maybe he'll do it for steel,'' he said.
Not everyone believes quotas are the answer. Charles Bradford, a vice-president of Merrill Lynch, said in an interview that the industry, ''by bad-mouthing imports, hurts its chances of improving productivity.'' He noted that steelworkers believe that halting imports will solve all their problems. ''I don't want to belittle the dumping that's going on now,'' the analyst said, ''but the US industry has to get its costs under control.''
Currently, he said, steelworkers receive a 60 percent wage premium over the average US worker. ''If that were rolled back to a third (33.3 percent),'' he added, ''productivity would be improved substantially.'' He said that should US Steel file an antidumping suit against Japanese tubular steel producers, as it is considering, the company's oil customers would probably be unhappy. ''Japanese tubular steel is the best quality,'' he said.
Steel analysts also point out that imported steel has dropped off sharply in recent months. In January, it represented more than 26 percent of the market. On May 26, the government reported it was only 16.5 percent. Domestic steel manufacturers, however, complain that the drop-off is only temporary as foreign manufacturers wait to see what happens on certain unfair-trade cases.
Imports and a shrinking marketplace aren't the industry's only problems. This year for the first time General Motors, the nation's largest consumer of steel, will buy its steel through competitive bids. GM normally buys its steel at the manufacturer's list price. A. R. McMurrich, vice-president for marketing and corporate planning of Stelco Inc., a Canadian steel company, says the implications of GM's change are not yet clear.
''It has caused some cloudiness in the marketplace,'' he commented, as other steel customers wait to see what price GM pays for its steel. ''I know GM is more sophisticated than just being interested in price,'' he continued; ''they also have to be interested in quality.'' GM, for its part, says it expects to make a decision on the steel by mid-June. And Mr. Bradford of Merrill Lynch says that all of the five domestic steel companies under consideration by GM have assured him that ''they are in the running.''
Another big customer this year has been the oil companies, which have been major buyers of seamless tubular pipe. The oil glut and a subsequent slowdown in domestic drilling, however, combined with an increase in pipe capacity, have hurt this market, too.
Looking at the total market for steel products, D. S. Arnot, executive vice-president of Bethlehem Steel, says he is ''hopeful'' the economy will improve in the third or fourth quarters. But Mr. Roderick of US Steel says he doesn't believe the economy has hit bottom yet. For the year, he expects steel shipments to drop to 70 million tons, compared with 120 million tons last year.
For some companies, the result on the bottom line has been disastrous. Already McLouth Steel in Detroit has gone into Chapter 11 bankruptcy, and others are operating deeply in the red.
Donald Trautlein, chairman of Bethlehem Steel, the nation's No. 2 producer, said in a press conference that his company may cut executive salaries by 10 percent if there is no improvement in the company's order book in the next few weeks. He expects the company, which has a negative cash flow, to draw down on its $300 million line of credit to obtain working funds to get it through the summer. But he said that Bethlehem would not make decisions about closing plants in the middle of the recession. ''It's not a good time at the bottom of the market to make decisions,'' he said, adding that the company had a list of 30 to 40 options it was studying.
He said he has a ''gut feeling'' the economy will pick up by this fall. Otherwise, he noted, ''there will be a lot of new houses'' in Washington available. The congressional steel caucus, he noted, seems to be getting ''more nervous'' as members visit their home districts.