Russia Agrees to Slash Steel Exports to U.S. by Almost 70% to Avoid Duties
Russia to Cut Steel Exports to U.S. 70%, Avoid Duties (Update3)
(Adds closing stocks, steel distributor's comments.)
Washington, Feb. 22 (Bloomberg) -- Russia agreed to slash
its steel exports to the U.S. by almost 70 percent from last
year, heading off punitive duties by the U.S. that would have
priced much of Russian steel out of the market.
The U.S. government said a five-year agreement to cap
Russian shipments, negotiated in Rome, will protect the reeling
U.S. steel industry, which has accused Russian companies of
''dumping'' hot-rolled steel, or selling it below production
costs. The agreement also set minimum prices for Russian steel
shipments.
The tentative agreement ''should provide immediate relief
from the surge in Russian steel imports in 1998,'' Commerce
Secretary William Daley said at a press conference. ''We're
trying not to bring them to their knees,'' he said of Russia,
adding that about 7 percent of that country's shrinking economy
is related to steel.
USX-U.S. Steel Group, Bethlehem Steel Corp. and 10 other
U.S. companies that filed the dumping complaint were seeking high
enough duties on Russian imports to drive them from the market.
The steelmakers threatened to challenge today's agreement by
suing the U.S. government at the Court of International Trade in
New York, a U.S. federal court that adjudicates trade issues,
because Russian steel will still be able to enter the U.S.
Same Pot
Paul Wilhelm, president of Pittsburgh-based USX-U.S. Steel
Group, said the Clinton administration is muddying trade policy
with other concerns. ''They continue to mix their trade policy
and their foreign policy in the same pot,'' said Wilhelm, who
runs the largest U.S. steelmaker. ''I'm obviously very
disappointed.''
USX shares fell 1/2 to 24 3/4, while National Steel Corp.
shares dropped 2 3/16 -- almost 25 percent -- to 6 3/4. Bethlehem
shares fell 1/8 to 7 15/16. Nucor Corp. rose 7/8 to 44 1/8, while
Weirton Steel Corp. was unchanged at 1 13/16.
The agreement bans Russian shipments of hot-rolled steel --
which is used in machinery and pipe and accounts for about 70
percent of the Russian steel shipments -- for six months. It sets
a quota of 343,750 metric tons this year, down 90 percent from
last year.
Russian steel exports to the U.S. rose 59 percent in 1998
from the previous year, and today's agreement will cut shipments
across the board -- from on cold-rolled to galvanized steel to
wire rod steel -- to about 1997 levels.
In return, the Commerce Department agreed not to impose
duties ranging from 71 percent to 218 percent on companies such
as AO Severstal, OAO Magnitogorsk Metallurgichesky Kombinat and
AO Novolipetsk Metallurgichesky Kombinat.
On Feb. 12, the Commerce Department announced preliminary
duties on Brazilian and Japanese hot-rolled steel of as much as
80 percent. Concern over those duties prompted Russia and others
to cut steel shipments to the U.S. 32 percent in December.
'To the Cleaners'
The agreement also establishes a minimum price of $255 to
$280 for a metric ton of Russian hot-rolled steel before shipping
costs of at least $30.
One of the largest distributors of steel in the U.S. said
that might be enough to keep the Russians from selling any steel
here anyway.
''If I'd negotiated this deal I'd be damned proud of it,''
said Nicholas C. Tolerico, executive vice president of Thyssen
Inc., a subsidiary of Germany's Thyssen AG and the second-largest
U.S. steel distributor. ''They took the Russians to the
cleaners.''
Tolerico, a former U.S. trade official, said Russian steel
sold for about $190 per metric ton before sales decreased six
months ago.
Hot-rolled steel made in the U.S. is now selling for about
$264 a metric ton, said Waldo Best, a steel analyst for Morgan
Stanley Dean Witter & Co. Russian steel has to be at least $20 a
ton cheaper than U.S.-made steel, including freight, Tolerico
said.
'Not a Prayer'
There's ''not a prayer,'' for selling Russian hot-rolled
steel within the agreement's terms, Tolerico said.
The price floor matters because the 32 percent jump in
overall exports of cheap steel to the U.S. last year drove down
domestic prices, forcing U.S. steelmakers to fire thousands of
workers, idle plants and see profits evaporate.
Yet U.S. steelmakers still aren't satisfied.
Curtis ''Hank'' Barnette, chief executive officer of
Bethlehem Steel, the No. 3 U.S. steelmaker, last week called the
negotiations with Russia, and prospects for similar discussions
with Brazil, ''unfortunate.''
''Our trade laws were enacted in order for them to be
enforced,'' Barnette said. ''The rights of the domestic companies
and workers are being taken away from us.''
'Situation is Tense'
While the Clinton administration has said it's trying to
protect U.S. steelworkers and the industry, it also recognizes
Russia is desperate. The government is in default and the debt-
strapped economy will contract more than 8 percent this year,
according to the International Monetary Fund.
''The situation is very tense,'' said Alexei Mordashov,
chief executive officer of Severstal, Russia's largest
steelmaker. ''We will have to slash production.''
Severstal cut output to 7.4 million metric tons in 1998,
down 2.8 percent from a year earlier. It exported 4.17 million
tons of steel, about 1 percent less than in 1997, as it managed
to diversify its exports from the U.S. to Asia, the Middle East
and Latin America.
To make today's agreement final, the U.S. government must
seek comments from the industry and public. The U.S. and Russia
also signed a memorandum of understanding meant to stave off
future trade disputes of this kind by having the Commerce
Department teach Russians about anti-dumping and other trade
laws.
Support for Talks
Some U.S. steel companies said they supported the Russian
talks. Wheeling-Pittsburgh Steel Corp. wants the U.S. to pursue
discussions with all steel-exporting countries accused of
dumping, Paul Bucha, chairman of the company, which is a division
of WHX Corp. of New York, said earlier this month.
U.S. steel imports last year rose to 37.5 million metric
tons, including 5.27 million net tons from Russia, according to
the American Iron and Steel Institute. A net ton is 0.9 percent
of a metric ton.
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