Dow Jones Business News
Executives Fault U.S. Efforts to Cut Steel Capacity
Tuesday October 8, 1:58 pm ET
By Robert Guy Matthews, Staff Reporter of The Wall Street Journal
ROME -- Executives from the top steelmakers said efforts initiated by President Bush to cut steel capacity in the world are essentially going nowhere because countries don't want to take the first step to eliminate jobs or undercut their economies.
"We are disappointed in the lack of progress in these capacity cut discussions," said Brian Moffat, chairman of the Anglo-Dutch steelmaker Corus Group PLC . Mr. Moffat is one of about 200 steel executives meeting in Rome to discuss the state of the global steel industry.
The world's steel industry produces about 20%, or about 200 million tons, more steel than can be consumed. That number is so large that, if every steel mill in the U.S. were to shut down immediately, there would still be too much steel produced in the world. The U.S. produces about 100 million tons a year.
President Bush last year took up the task of convincing about 40 of the world's steel-making countries to shut down inefficient plants. The U.S.-led initiative has met several times in Paris under the auspices of the Organization for Economic Cooperation and Development.
No agreements have come out of those meetings. The discussions have been bogged down by the local political concerns of each country. While agreeing that steel plants do need to be shuttered, few government officials want to go back to their home countries and lay off people. Another meeting is scheduled for this December.
Mr. Moffat said that he, along with other steel executives, would lobby their governments to come up with an agreement before the scheduled December meeting. To avoid antitrust violations, the steelmakers themselves cannot agree to cut capacity because that would put them in the position of manipulating steel prices as a group.
To work around that, government officials of steel-producing nations would agree for targeted capacity cuts for each of the countries that would then be taken back to the steelmakers in those countries. But steelmakers complain that the agreement has no real teeth because, even with an agreement drafted by the governments, the steelmakers aren't required to comply.
Fumio Sudo, chief executive and president of Japan's Kawasaki Steel Corp., said that the U.S. needs to find another solution to dealing with the world's overcapacity issue. "The U.S. has significant influence over the world's steel industry, and its attempt to restore world order has not been done or received well."
Why Bush was right about imposing tariffs:
The world's steel industry produces about 20%, or about 200 million tons, more steel than can be consumed. That number is so large that, if every steel mill in the U.S. were to shut down immediately, there would still be too much steel produced in the world. The U.S. produces about 100 million tons a year.
How does Bush's action restore the demand side of the market equation? |
