Publication Date

10-31-2007

Abstract

[Excerpt] The rapid growth of steel production and demand in China is widely considered as a major cause of continued high steel prices and prices of teelmaking inputs. Steel companies have achieved much greater pricing power, in part through an ongoing consolidation of the industry. High prices persist, despite the revocation in 2003 of President Bush’s broad safeguard order on imports. U.S. steel production in 2006 was 108 million tons. The integrated side of the industry continues to lose share domestically to the minimills. Imports rebounded in 2006 to reach the highest tonnage level ever, though they declined in 2007. Input prices, especially ferrous scrap and iron ore, remain high, meaning higher costs, which have been largely passed along to industrial consumers. China now produces 40% of the world’s steel and is the world’s largest steelmaker and steel consumer. This contributed to a large global increase in demand for both steel and steelmaking inputs. China has become a large net exporter as well. In 2006, its steel exports to the U.S. market more than doubled, and it became the second-largest import source. Congress became increasingly concerned over allegedly unfair trade competition from China, and has considered many proposals to deal with these issues. In the 110th Congress, bills were introduced to allow penalty tariffs to offset a country’s manipulation of its currency exchange rate for trade advantage. The Commerce Department undertook a countervailing duty case against China, and the U.S. government also brought a case in the World Trade Organization against China over subsidies, including subsidization of steel exports. The U.S. steel industry sponsored in 2007 a report that detailed alleged government subsidies to the Chinese industry. The U.S. International Trade Commission (ITC) has terminated some trade remedy cases and orders against imported steel products. But in other cases, orders have been upheld, and new cases are proceeding. President Bush decided in a China safeguard case not to provide relief for domestic producers of steel pipe, despite a positive ITC determination. The Byrd Amendment, under which domestic steel producers receive distributions of trade remedy duties, was repealed by P.L. 109-171, and is no longer in effect from October 1, 2007. Internationally, the Organization for Economic Cooperation and Development has abandoned the effort to achieve an international agreement to ban subsidies for steel mills. In April 2006 the World Trade Organization, (WTO) Appellate Body ruled against the “zeroing” methodology used by the U.S. Commerce Department in calculating dumping margins.

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Suggested Citation
Cooney, S. (2007). Steel: Price and policy issues (RL32333). Washington, DC: Congressional Research Service. http://digitalcommons.ilr.cornell.edu/key_workplace/487/

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