Dear Editor,

As reported by Steel Market Update (SMU 4/29), “Thank God for Foreign Fighters” was a statement made by a well-known steel analyst during Reliance Steel & Aluminum's recent quarterly earnings conference call. I have some thoughts about that comment (and about some of the other comments that were made). To add insult to injury, Reliance's no. 2 man Gregg Mollins responded with an "Amen" to the analysts comment. To be fair, that's a major drop in heat compared to his most recent statements about imports, which sounded like the survival of this country was in jeopardy.

For those who still don't seem to get it, let me attempt to explain one more time why steel imports are not only good for the importers, and for those distributors and end-users who buy from them, but also for the steel mills themselves, and ultimately for the country. Without imports, which act as brakes against the tendency of US steel producers of wanting to increase prices all the time, even when the markets are not cooperating, the steel consuming industries in the US would be decimated. High domestic steel prices would make most domestically manufactured products made of steel too expensive - not only in the export markets, but also here at home. That in turn would open the flood gates to imports of finished products like cars, appliances, pipe and tubing, machinery and all kinds of other items, as foreign producers unimpeded by high steel prices in their own countries could produce these items at much lower prices.

So, instead of happily serving 80% of a large and vibrant market, the mills sound like they'd rather supply 100% of a much smaller, and shrinking, market. Anybody who does not get this need to repeat "Economics 101". What continues to amaze me is why people who I know are smart enough to understand the mechanics of this continue to make these broad and outrageous anti-import statements. Does Reliance get preferential treatment from the US mills in return, or does the analyst gain additional subscriptions to their research papers? I think not, but such thoughts have occurred to me.

The analyst apparently also requires a crash-course on the rules and mechanics of our dumping laws. Contrary to what the analyst insinuated during the conference call, dumping is when a foreign producer exports their steel products to this country at prices that are either below their home market prices and / or below their cost of production - nothing more and nothing less. Just because an overseas producer or a country ships a lot of steel to the US and thus creates a "surge” that does NOT automatically constitute dumping. Unless such products are actually "dumped" under the true definition, there is absolute nothing that can or should be done. Another of her comments that left me a bit puzzled was their statement about China "having been producing so much". Number one, production means absolutely nothing in this context. Number two, even if China attempted to ship their alleged over-production to the US, they would have a hard time doing so, because most of their steel products are already subject to prohibitive dumping and countervailing duties here - the result of earlier dumping and countervailing duty cases. They can't ship hot rolled coil, plate, rebar, most types of tubular products and a variety of others.

Furthermore, I take exception to her depiction of pulled imports and pushed exports, or demand pull and supply push, as she put it. How does one actually push these exports? In the end, somebody in this country as to buy these products. Even if an importer or a foreign mill were shipping products over here on pure speculation, bringing it into this country "unsold", it would not do them any good until the product becomes un-unsold, until it is actually sold in the US market to an unrelated party. And if the owner of the steel had trouble finding a buyer and would therefore feel compelled to reduce the price, chances are that by doing so, they would cross the line and actually sell below their cost or their home market price, thus opening the country to the possibility of a dumping suit.

And what exactly is a "foreign fighter", i.e. who is fighting whom here? I remember a time in the 70's, when Armco Steel had a foreign fighter program for wide flange beams, and many other producers, including Northwestern Steel + Wire, were matching these prices on a delivered basis. For the record, Armco's Houston facility has long since been closed, and Northwestern has ceased to exist as well, after making a very ill-fated attempt to resurrect the old Armco mill. These programs invariably apply a shot-gun approach to the market when in reality sharp shooting skills are required. As a result, they mostly fail to produce the required results.

Last, the subject of imports also had come up in the recent analyst call by Nucor, with CEO DiMicco badgering imports as he is known to do. When asked whether the fact that recent domestic price increases on hot rolled coil, which had widened the spread between domestic and import prices to well over a hundred dollars per ton, were at least partly to blame, he responded with an insult.

Frankly, I don't get this. Dan DiMicco reserves the right to run his mills the way he sees fit, and so do the CEOs of most if not all other steel producers around the world. Are all of Nucor's decisions smart all the time? Of course not....

Peter Brebach

CEO Iron Angels of Colorado

The opinions presented in the letter above are those of Peter Brebach. Steel Market Update encourages a continuing dialogue on the subject of imports, their value (or lack thereof) and the various remedies the domestic mills can utilize to increase their market share and reduce the impact of foreign steel. You can respond to Peter's letter by sending your thoughts to: info@SteelMarketUpdate.com