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Business Climate Not Best For Steel
May. 11th, 2010
Despite signs of economic improvement, the steel industry faces challenges this year -- ranging from legislation aimed at reducing greenhouse gases, to unfair foreign trade, to the cost of energy and raw materials, analysts said.
The biggest issue this year is proposed climate-change legislation pending in Congress, said steel-industry analyst Charles Bradford of Affiliated Research Group LLC of New York.
Congress is working on a compromise bill -- a controversial cap- and-trade proposal that would set limits on emissions but allow companies to trade or sell to other companies the permits necessary to emit greenhouse gases into the atmosphere.
Climate-change legislation and other industry concerns will be discussed in Pittsburgh when steel-industry executives meet at the Iron & Steel Technology Conference and Exposition, which opens Monday in the David L. Lawrence Convention Center, Downtown. The event is expected to draw 5,500 representatives of producers, suppliers and distributors.
U.S. Steel Corp. CEO John P. Surma is scheduled to deliver a keynote address Tuesday.
The industry is recovering from a disastrous 2009, when production, shipments and profits plunged.
The three largest U.S. producers -- Nucor Corp. of Charlotte, N.C.; U.S. Steel of Pittsburgh; and AK Steel Holdings Corp. of Middletown, Ohio -- lost a combined $1.76 billion.
Posting first-quarter profits this year are Allegheny Technologies Inc. of Pittsburgh; Steel Dynamics Inc. of Fort Wayne, Ind.; Nucor; and AK Steel.
U.S. Steel, on the other hand, reported a loss of $157 million, although it is the company's smallest quarterly loss since December 2008.
The industry is lobbying in Washington to ensure that its voice is heard on the climate-change issue and that approved legislation takes "a global approach," said Nancy Gravatt, a spokeswoman for American Iron & Steel Institute, a Washington trade group representing domestic producers.
Bradford said steel can't be made without using carbon and emitting-carbon dioxide. He noted that forcing the industry to meet stricter environmental standards "is deadly."
A bill that would limit greenhouse gases not only would be a "disaster" for the steel industry, but would affect how steel is moved into and around the country -- adding to costs, said David Phelps, a president of the American Institute for International Steel Inc., a McLean, Va., trade group supporting free trade.
Although the U.S. steel industry has reduced energy usage by 31 percent since 1990, and its greenhouse emissions by about one-third in the same period, any climate-change bill would hurt the industry's competitiveness and hurt jobs, Gravatt said.
If manufacturers are less competitive, then business likely would go to China or India, where environmental regulations are more lax and global pollution would increase, Gravatt said.
"We'd lose on both fronts -- the jobs first and then the environment," Gravatt said.
Unfair trade has been a big issue for the industry, which won several complaints it has filed with the Department of Commerce against China for dumping steel products in the United States at prices below fair-market value or for selling products subsidized by China.
Surma said this week in Pittsburgh that U.S. Steel supports free trade. The company can compete and get its share of the market, as long as it is fair trade.
The industry needs the federal government to address the issue of China manipulating its currency -- allowing it to remain cheaper than the dollar -- so that its imports are less expensive here, Gravatt said.
"China is manipulating its currency for its exports, and that's quite an advantage for their manufacturers," Gravatt said.
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