The industry was aware that when some American producers lost the protection of a quota agreement last March they were likely to take legal action to protect themselves. Although the US does include the most efficient steel makers in the world - the mini-mill specialists such as Nucor - its traditional integrated plants have suffered from underinvestment in the past 20 years. One industry source estimates they are 40 per cent less competitive than those operated by British Steel or the best French producers.
Eighty US companies duly made allegations against competitors in 19 countries. They claimed either that their rivals were subsidised (so triggering so-called countervailing duties), that they were dumping by selling more cheaply than at home, or both.
Having laid these charges, the US legal juggernaut started rolling. One of the first companies to be targeted was UES, the Sheffield-based joint venture between British Steel and GKN. It was told that a combination of subsidy and dumping meant that it would have to pay a 38 per cent levy on its leaded bar exports.
In November a number of companies were hit by countervailing duties of up to 90 per cent. British Steel had a levy of 19 per cent applied to steel plate. The latest round of duties brings the anti- dumping levies into play. British Steel was hit by a punitive 109 per cent levy, not because that it is the correct duty, but because it told the Commerce Department investigators that they could not examine its books. British Steel will now try to get the ruling thrown out by the International Trade Commission, whose job is to determine whether foreign perfidy has damaged US companies.
European steel makers are puzzled by the arithmetic the Americans have used to come up with the duties and worried about the effect the move will have on an already oversupplied market.
With British Steel at least, the figures do not seem to support the US case. The company says it has always sold at the market price. In 1991, according to the steel analysts MEPS, this was pounds 205 per ton of steel plate in the UK and dollars 410 in the US. Given that the exchange rate was rather less than dollars 2 to the pound, British Steel was more expensive at home than in the US.
But the Americans do their sums differently. They are interested in the 'factory gate' price and so deduct freight costs. According to Edward Good, a director of the British Iron and Steel Producers Association, this 'means that pretty well all imports into the US are dumped'. If European producers were dumping, they would need to be selling at suicidal rates: domestic prices in Britain and the rest of the EC have collapsed since early 1990.
Although some companies, including UES, may continue to sell into the US despite the duties, there is a danger that 2-3 million tons of steel will be dumped back into a European market already drowning in it at rock-bottom price. In the past two years EC steel prices have dropped by 12 to 30 per cent, driven down by recession, overcapacity and the growing inroads made by cheap steel from former East Bloc countries.
The impact has been dramatic. Klockner-Werke, the German producer, has been forced to seek protection from its creditors while Thyssen yesterday threatened to sell off some steel operations if subsidies to rivals are not curbed. Even British Steel, the most efficient producer in Europe, has been pushed into heavy losses.
Steel consultants estimate that EC crude steel production needs to be cut this year by at least 2 million tons in each of the first two quarters to correct the balance between supply and demand and create sustainable market prices. The effect of the US action would largely be to reverse these cuts.Reuse content