The steel industry in the USA

Steel has been part of the greatest achievements in history. It was the “iron horse” and steel rails that helped carve a nation out of the frontier. Steel is the backbone of bridges, the skeleton of skyscrapers and the framework of automobiles. Now in the 21st century, it is still revolutionizing the way we live. It is high strength frames for eyeglasses; it is a strong durable frame in housing and it’s precise surgical instruments used in hospital operating rooms around the world.

Iron has been a vital material in technology for well over 3,000 years. But until the Industrial Revolution, its mining, smelting, and working were largely done by individuals and small groups. Known since ancient times, steel is made by alloying iron with carbon to produce a harder stronger metal.

Steel was very expensive to manufacture by the primitive methods available and was used largely for specialty items such as swords and precision instruments. “Steel making (in the 18th century) was a laborious and time-consuming process.” (1) Manufacturing of steel improved during the 19th century with Henry Bessemer’s invention of using a blast furnace method for making steel.

During the 20th century, a basic oxygen-furnace process and the electric arc furnace produced steel. The electric arc method is the least costly method of making steel. This uses scrap metal as its base. Steel scrap from many sources such as old bridges, refrigerators and automobiles and other sources are placed in an electric arc furnace, where the intense heat produced by carbon electrodes melts the scrap, converting it into molten steel. Establishments that use this method of producing steel are called electric arc furnace (EAF) mills or minimills.

The small initial capital investment required to start and operate an EAF mill has helped drive the growth of the production method. Scrap metal is found in all parts of the country so EAF’s are not tied as closely to raw material deposits as are integrated mills and can be placed closer to consumers. EAF mills now account for about 50 percent of American steel production up from 25 percent two decades ago and their share is expected to grow in coming years. (2)

The growth of EAF’s come partly at the expense of integrated mills. Many of the integrated mills have been facing the decision to continue or shut down. Many have continued operating with deteriorating buildings. They are still able to operate but have no funds to upgrade facilities.

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Bethlehem Steel on the other hand, was a major steel company that dissolved. They do have a great plan to preserve its production buildings. Nearly 163 acres of industrial land would be converted into a historical, cultural and commercial complex that would pay homage to the area’s steel making history. This would be a huge economic boost for the community creating more than 2,400 permanent jobs and tax revenues of about $20 million per year for local & state governments. (3)

The steel industry ahs undertaken a dramatic modernization program in the past decade. More than $50 billion has been invested in new plants and equipment, new technology has been implemented and a new generation of mills has largely replaced the old. Steel companies, like most businesses, have entered the era of sophisticated technology. This technology has improved both product quality and worker productivity. Computers are essential to most technological advances in steel production, from production scheduling and machine control to metallurgical analysis. Computerized systems change the nature of many jobs, while they elimate or reduce the demand for others. For the workers, modernization has meant learning new skills to operate sophisticated equipment. Competition also has resulted in increasing specialization of steel production as various producers attempt to capture different niches in the market. As international and domestic competition continue for U. S steel producers, the nature of the industry and the jobs of its workers are expected to continue to change.

Domestic steel prices declined significantly during 1998 and 1999, allegedly because of dumping of subsidized, low-priced steel products onto the U.S market by foreign producers. The steel industry appealed to the Government for vigorous enforcement of trade laws in response to the alleged dumping and received support from the U.S. Department of Commerce in the form of antidumping duty margins against several countries. Later, the International Trade Commission ruled against the industry claiming that the industry did not suffer irreparable damage from the extra imports. (4)

The U. S Antidumping Act of September 8, 1916 allows civil actions and criminal proceedings to be brought against importers who “commonly and systematically’ have imported or sold foreign-produced goods in the United States at prices which are ‘substantially less’ than the prices at which the same products are sold in a relevant foreign market, provided that such action is committed with the intent of ‘destroying or injuring’ an industry in the United States, or of preventing the establishment of an industry in the United States, or of restraining or monopolizing any part of trade and commerce in such articles in the United States. (5)

The 1916 act should have been displaced by U.S. membership in the World Trade Organization as WTO rules supercede. A European Union investigation and WTO investigation both concluded that the 1916 Antidumping Act was in breach of the anti-rules of the WTO. The U.S. failed to respond, however and the EIU forced WTO consultations with the U.S. on July 29, 1998. The U. S. refused to consider the matter, however, the EU then pursued its next option under the WTO, a panel. On February 15, 2000, the panel found that the 1916 Antidumping Act does indeed violate WTO rules. (6)

In late 2000, one of the final acts of the outgoing 106th U.S. Congress was to pass the Agriculture Spending bill. Included in that bill, as amendment Title X, Sen. Robert Byrd inserted the Continued dumping and Subsidy Offset Act of 2000. Sen. Byrd, the senior Senator from West Virginia, picked up on the CDSOA as a way to support the ailing steel industry in his neighboring states. Senator Byrd added the CDSOA as an unrelated “rider,” Title X, to that critical agriculture appropriations bill. Few congressmen say they realized it had been added, and it passed almost unnoticed, with no deliberation. After that maneuver, it became known as the “Byrd Amendment.” (7) The law allows American companies to receive proceeds from duties levied on foreign rivals for alleged “dumping” – selling goods at below-market prices, making it impossible for American producers to compete.

When Senator Byrd sponsored the legislation, he stated that the program would primarily benefit U.S. steel manufacturers; he also indicated the General accounting Office had determined the program would cost no more than $38 million. In fact, however, the CDSOA program in 2001 paid out $230 million to 900 claimants. In 2002, the amount rose to $329 million paid out to over 1,200 claimants.

The EU and eleven other countries – the largest number of complainants ever in a WTO trade dispute, brought about a complaint. They claim their countries and economies are being punished twice because first they are fined and then those fines are handed to competitions. They also say that the CDSOA is an illegal subsidy under the WTO.

On March 5, 2002, President Bush signed into law a three-year relief program for the domestic steel industry; this program has come to be known as “Steel 201.” It allows the President, congress, or the industry itself to request protection against damaging importations of steel. He made customs the lead agency for implementing the new trade remedy. The Customs Service would design, administer and enforce the steps, manner and procedures under which 201 Steel, which imposed additional duties on certain steel imports of up to 30 percent, would take shape and function. (8)

The United States mini-mills keep grabbing market shares from imports under the tariff protection and from the integrated mills. If the Byrd Amendment continues, steel companies will continue to file suits and collect tariff monies. These monies have been used to relieve the companies claiming to be harmed by unfair trade. Although these tariffs are meant to save the steel industry from going under, our economy is going to pay a high price now and in the future.

On November 25, 2005, a selection of the goods, which could be hit with punitive duties under a request by the European Union and other plaintiffs to retaliate against the U.S. Byrd amendment, were submitted to the World Trade Organization. Not all the nations have submitted their lists and there are already over 75 items on the list.

The politicians have dug in their heels to protect the steel industry. U.S. policy-makers have declared antidumping a sacred cow off limits to revision and discussion in any future trade agreements. A recent letter to President Bush from Senate Finance Committee Chairman Max Baucus (D-Mont.) and signed by 61 senators expressed this view. (9) At this point in time they have no intention of repealing the Byrd amendment. They are protecting the steel industry without concern for the other industries that will be affected by retaliation from the countries that have filed complaints against the U.S.

With changes and continued update of technology and protection from our government – THE STEEL INDUSTRY WILL SURVIVE.