Worldwide steel scrap shortage hits US, parts of Asia
Mon Mar 8,10:23 PM ET Add Business -
WASHINGTON, (AFP) - A worldwide steel scrap shortage, largely created by massive Chinese demand, is creating "havoc" for US industries and forcing emergency action to cap prices in parts of Asia.
American steel-consuming industries pleaded for the government to suspend all anti-dumping and anti-subsidy tarrifs on imports, meeting swift and sharp opposition from the US steel industry.
Steel scrap prices in the United States -- measured by the benchmark "number one" heavy melt scrap -- doubled from 77 dollars a tonne in early 2001 to 156 dollars a tonne in December 2003 before skyrocketing to an unprecedented 302 dollars a tonne last month.
"These sharp price increases and the potential for scrap shortages are having significant, harmful effects on important manufacturing sectors of the US economy," said the Emergency Steel Scrap Coalition, grouping steel makers, auto parts manufacturers and other industries.
Scrap exports from the United States doubled from 6.3 million tonnes in 2000 to about 12 million tonnes in 2003, the coalition said.
The pain is being felt by steel consumer industries, just three months after they celebrated President George W. Bush (news - web sites)'s decision to rescind import tariffs aimed at protecting the domestic steel industry.
A steel shortage was "causing havoc for US manufacturers" said the Consuming Industries Trade Action Coalition (CITAC).
"US manufacturers are facing major steel supply disruptions and shortages that could contribute to plant closures and job losses in a matter of weeks or months," CITAC said in a statement.
CITAC chairman Michael Fanning called on the Bush administration to suspend existing anti-dumping and anti-subsidies tariffs on steel.
There are about 131 such orders on iron and steel products, he said.
"Under the current crisis market conditions, we believe that these restrictions should be suspended," Fanning said.
A surge in steel prices helps "integrated steel mills", the least efficient part of the American industry, because they barely use scrap and can enjoy the higher prices commanded by steel.
But steel "minimills", which rely heavily on scrap to produce steel, have been hit hard.
"These are very unusual times. There is tremendous uncertainty," said Thomas Danjczek, president of the Steel Manufacturers Association, which represents 90 percent of the American minimills.
Prices were being pushed higher by Chinese demand, a weaker dollar, and foreign trade restrictions, he said.
"China has an insatiable appetite for a lot of raw materials," Danjczek said, noting in particular steel scrap, lead, brass, copper, recycled paper and alloys.
He scoffed at the CITAC call for a suspension of anti-dumping and anti-subsidy import tariffs on steel, noting that Bush had already dissolved the "safeguard" steel tariffs to shield American industry from imports.
"Here is a group that got caught with their hand in the cookie jar and now they want to get rewarded for that," Danjczek said.
Similar disruptions are being felt in Asia.
South Korea (news - web sites) has issued a temporary ban on exports of scrap iron and steel bars, beginning Monday.
In Seoul, the Finance and Economy Minister Lee Hun-Jai warned a further surge in raw material prices could delay the recovery of consumption and undermine growth.
Vietnam cut tariffs for the second time in less than a week on March 3 to curb prices.
In the United States, analysts were split over the value of suspending all steel import tariffs.
Daniel Ikenson, policy analyst with the Washington-based Cato Institute's Center for Trade Policy Studies, said he favored provisions allowing tariffs to be dropped in times of shortage.
"In the past six months, steel prices have gone through the roof for a lot of products, primarily because demand has been increasing not only here but in China and elsewhere," he said.
Ikeson doubted US tariffs would be dropped because of the "vested interests" in the steel industry.
"But I think it is a good opportunity for CITAC and others to bring to the fore the absolute absurdity of import restrictions, particularly in cases where prices are spiking."
Economic Policy Institute analyst Robert Scott disagreed.
The tariffs were in place to correct unfair trade practices, he said.
"We have to use every tool available to level the playing field," Scott said.
The steel tensions were global, he added.
"China is a vast consumer of steel now," Scott said. "They have increased their steel production by more than 50 percent from 2000 to 2002 alone and their imports have gone up up similarly." |
