A worldwide glut of production capacity has plunged the U.S. steel industry into an import crisis, according to Surging Steel Imports Put Up To Half a Million U.S. Jobs at Risk, a new paper released today by the Economic Policy Institute and the Law Offices of Stewart and Stewart. In the aftermath of the Great Recession, state-backed steel companies in China, South Korea, India and elsewhere have increased production even as demand has stagnated, and the United States has become a prime target for manufacturers to unload excess steel supply at below-market rates. Since 2011, U.S. steel imports have surged and prices have plummeted, putting the U.S. steel industry and the half a million jobs it supports at risk.
“The excess capacity plaguing the steel industry is a result of massive government support for the steel industry in other countries. Half of the world’s top steel companies are state-owned. These companies have ramped up capacity and are producing much more steel than the market demands,” said Terence P. Stewart, Managing Partner of Stewart and Stewart. “The U.S. steel market is the number one target for offloading excess supply.”
Because of high fixed costs, capital intensity, and the large scale of steel making, state-backed steel producers are encouraged to maintain production in excess of domestic demand and export the surplus at below-market rates. Because of its size and openness, the U.S. steel market has become a prime target for this excess supply. U.S. steel imports increased from 28.5 million net tons in 2011 to 32 million in 2013. Imports have increased even more sharply in the first two months of 2014, increasing nearly 25 percent over the same period in 2013.
“The steel industry is hugely important to the U.S. economy,” said EPI Director of Trade and Manufacturing Policy Research Robert E. Scott. “It directly supports half a million jobs, and those jobs are in imminent danger. The import surge has led to sharp declines in income in the steel industry, layoffs for thousands of workers, and reduced wages for many more.”
As a result of the import crisis, the U.S. steel industry has had net losses of $388 million in 2012 and $1.2 billion in 2013. In fact, it has seen net losses in four of the past five years. The 583,600 steel-related jobs are at risk if the United States does not fully and effectively enforce its trade remedy laws, which have historically been vital to the survival of the steel industry.
“The United States should vigorously enforce its trade remedy laws to counteract the dumping and subsidization that gives imported steel products an unfair advantage in the U.S. market,” said Elizabeth Drake, Partner at Stewart and Stewart. “Trade remedies were essential in helping the U.S. steel industry survive its last import crisis, and their effective enforcement is equally critical today.”