Steel Products

Former CEO’s: Need Larger Damages Before Mills Can File a Trade Case
Written by John Packard
November 11, 2014
Steel Market Update is speaking at the Cowen & Company conference in New York City this week. On the agenda today were three former “captains of the industry” – Dan DiMicco, John Surma and Keith Busse – each a former CEO of a major steel producer, DiMicco with Nucor, Surma with US Steel and Busse with Steel Dynamics.
The conversation began when Cowen & Co metals and mining analyst, Anthony Rizzuto, asked for the group to respond to the victory by the Republicans last week and what the steel industry should expect (or hope for) out of the new congress.
In what might be a bit of a surprise to some, Dan DiMicco told the group that the Republican leadership “has not been a friend” to the steel industry. He said, “Some of the Republican leaders are blind free traders” and he was concerned that they were not focused on “rule-based and enforced” trade laws. This was something that the group reported has not been a focus of any administration since Ronald Regan.
The three former steel mill CEO’s believe that the new Republican controlled congress will at least begin passing bi-partisan legislation that force Democrats to at least vote and make their positions known.
They spoke about a whole host of subjects but foreign steel imports and the need for balanced and fair free trade governed by the rule of law was one subject that was on everyone’s mind.
The main issue is the over capacity of steel making in the world, with China’s close to 1 billion tons of production being the main culprit. The group did not see the practice of keeping social unrest in check by providing jobs at the cost of burying the rest of the world in cheap steel as being sustainable.
When asked how the problem would be fixed Dan DiMicco replied, “The only way they change is if the pain is greater than by not making a change.”
He went on to point at the termination of the Russian Suspension Agreement and how it came about, “Russia pissed us off,” he said. “This was one way we [USA] could put a burr in their saddle.” At some point in time China is going to do something that provides the trigger to stop them from dumping steel into the United States.
The group was asked about the potential trade cases on light flat rolled (cold rolled and coated steels) to which John Surma replied, “Essentially you have to be dead or on death’s bed before you can sue.”
Keith Busse added, “There clearly are subsidies, but you need to have more sizeable damage before you can get to a trade case.”
They all agreed that the mills need to continue to be vigilant. DiMicco pointed out that at some point in time, “we will attack cold rolled and galvanized.” He went on to say that if the mills don’t react the pressure will build. “The Russians are exporting somewhere else, which increases the friction [world wide].
Later in the day, Mario Longhi, the current President and CEO of US Steel told the group in his keynote address that the Chinese, “…are looking to export their way out of trouble.” He said that through the political promotion of a “sense of social harmony,” the Chinese government support of the industry goes against capitalistic rules: the market should decide what capacity should be built and the market should decide what companies are successful and those that should go out of business.
China exported 8.5 million tons during the last month we have data. He said this is up 73 percent year over year and was a direct result of worldwide excess capacity.
He too echoed the comments of his predecessor regarding the filing of new trade cases, “You are dead before you have a chance to fight.” He went on to say that they would not give up on sheet cases. “It is a complex equation before you can come to the point when you can file a case.”

John Packard
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