U.S. Trade Panel Rules for Domestic Steelmakers

WASHINGTON — The U.S. International Trade Commission sided with U.S. steelmakers in a case over Chinese steel Wednesday, voting that U.S. industry has been damaged by a flood of imports of subsidized steel from China.

The ruling, which will likely result in duties of between 10% and 16% on future imports of Chinese steel pipes used to drill for natural gas and oil, is the latest in a string of trade decisions against China, the U.S.’s largest trading partner, and threatens to aggravate trade tensions between the two nations.

On Tuesday, the U.S. imposed preliminary antidumping duties on imports of steel-grating products from China, prompting strong reaction and saying the move sends a “wrong, protectionist signal.” Earlier this year, the Obama administration imposed tariffs of 35% on consumer tires from China, prompting a probe by China into whether U.S.-made autos were being dumped in China at unfairly low prices.

The steel-pipe case is the ITC’s biggest ever by dollar amount, and comes as the world’s recession and overall drop in demand for steel products has caused steelmakers to fight for a smaller pool of customers. All six commissioners ruled that imports of so-called oil country tubular goods from China, totaling $2.8 billion in 2008, injured U.S. manufacturers. The commission is made up of three Democrats and three Republicans, five of whom were appointed by the Bush administration and one by the Clinton administration.

The Chinese government can appeal Wednesday’s decision to the World Trade Organization, and Chinese steelmakers can appeal to a federal district court in New York that handles trade cases. Daniel Porter, a Washington attorney representing the Chinese exporters, said a decision on whether to appeal could be made in several weeks, once a detailed ruling by the ITC explaining the rationale for its decision is made public.

“We are obviously disappointed,” Mr. Porter said. Chinese steelmakers argued that the U.S. industry is trying to stymie legitimate competition and wasn’t injured by the imports. They note the U.S. steel industry was making record profits, especially in 2008, when selling pipe and tube to energy and exploration countries, and argued that Chinese imports increased to meet demand in the U.S. “It’s hard to see how those imports caused injury,” Mr. Porter said.

But U.S. steelmakers said China was pumping in so many imports that the prices eventually fell by half, due to undercutting, and caused inventories to swell. Imports of steel pipe from China nearly tripled in recent years, resulting in nearly half of the 6,000 workers in the domestic pipe industry being laid off, they argued.

John Surma, CEO of U.S. Steel Corp., said he was “pleased” with the ITC’s ruling on Wednesday. “This enormous surge of unfairly traded goods resulted in an overhang of inventory that crippled the domestic industry.”

Pittsburgh-based U.S. Steel and seven other domestic producers, along with the United Steelworkers, filed a trade complaint in April against Chinese producers and exporters, claiming China’s government was subsidizing pipe-production costs.

Last month, the U.S. Commerce Department imposed countervailing duties on the steel pipes ranging from 10.4% to 15.8%. The ITC’s decision Wednesday allows the government to finalize those duties. The Commerce Department and ITC will make separate decisions next spring on whether to impose antidumping duties if it is determined that the pipe products were dumped onto the U.S. market at prices below the cost of production.

Buyers of Chinese steel pipe, who go on to sell it to drilling companies, say they are in a tough spot now. “By shutting off this Chinese steel, it’s going to put a tremendous amount of pressure on the tubular industry,” said Mike Jordan, CEO of Mike Jordan Co. in Fort Smith, Ark.

Mr. Jordan said his company, which sold 250 million tons of tubular steel annually in the past three years, is now searching for products from other countries, but that “there’s not enough quality steel mills in the world to produce the type of steel needed for wells being drilled in the U.S.” He predicted that domestic steel producers will raise steel prices that could eventually be passed on to consumers of natural gas.

The United Steelworkers, which has been actively involved in filing trade cases and was the driving force in the tire case, said the decision would enable companies to bring back laid off workers. “Today’s vote by the trade commission makes it clear to American pipe workers and industry that the U.S. government will stand up against China’s violation of fair trade rules,” said Leo Gerard, the union’s president.

Still U.S. steelmakers aren’t expected to immediately begin rehiring, as inventory levels need to be reduced.

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