Statement of Peter Dooner, President, Wheatland Tube Company, Collingswood, New Jersey, on behalf of the Commitee on Pipe and Tube Imports 201 Coalition
Testimony Before the Subcommittee on Trade
of the House Committee on Ways and Means
March 26, 2003
These written comments are submitted by the CPTI 201 Coalition for the official Committee record with regard to the Section 201 Steel Safeguard hearing. To supplement the Coalition’s testimony provided on March 26, 2003 the written testimony elaborates on three main points made to the Committee about the impact of the 201 relief on the welded pipe and tube industry. The differential relief of 30% tariffs on flat rolled products and 15% tariffs on welded pipe and tube products has caused a cost price squeeze on the domestic industry which is particularly evident in the latter part of 2002 and early 2003. Unlike the flat rolled industry in which three of the four flat rolled mills shut down during the time period between President Bush’s June 2001 Section 201 request and the beginning of 201 relief in March 2002, none of the pipe and tube mills shut down since November 2001 have been reopened by new buyers.In November 2001, Laclede Steel shut down its operations including continuous weld pipe mills located in East Alton, IL and Fairless, Pennsylvania. These mills had a combined capacity of 450,000 tons annually of welded pipe and tube. While there has been a recent announcement of a purchase and plant reopening of the Laclede melt shop in East Alton, Illinois to produce special bar quality products, this new owner has no plans to reopen the pipe mills. In addition, Geneva Steel shut down a 150,000 ton pipe mill producing welded pipe up to 16 inches in outside diameter. Maverick Tube announced the closure of the former LTV tubular mill in Youngstown, Ohio with 170,000 tons of capacity to produce welded pipe and tube up to 16 inches outside diameter. This plant is being shut down at the present time. In addition, Excalibur Tube Company went into Chapter 7 liquidation in early 2002. Their mills had an estimated total capacity of 150,000 tons. Olympic Steel Tube shut down its operations in mid 2002 and had an estimated 100,000 tons of capacity. Thus, over a million tons of capacity has been removed from the U.S. pipe and tube market in the past 18 months. (See attached chart)
The industry has also seen two major consolidation and restructuring efforts. First, in April 2002 Wheatland Tube acquired the Sawhill Tubular division of AK Steel. In December 2002 Maverick Tube acquired the LTV Tubular division from the bankruptcy court and LTV.
Overall, imports of welded tubular products other then OCTG which is the pipe and tube product category that received 201 relief, declined by approximately 10% in 2002 compared to 2001. However, we believe that due to the significant downturn in non residential construction which is the primary driver of demand for welded tubular products other than OCTG, that import market share of these products actually increased after the imposition of 201 relief. The reason for this increase in import market share even after 201 relief is that imports of pipe and tube subject to 201 duties from certain countries did not decline after the imposition of relief and that imports of pipe and tube from some excluded developing countries have surged.
For example, as seen on the attached charts, imports of welded pipe and tube from Thailand increased in 2002 after the imposition of the 15% tariffs. The reason for this is that the Thai producers limited the amount of 201 duties they had to pay by reducing the customs value of their exports to the United States. This is truly incredible given the sharp rise in steel costs in Asia that occurred in 2002. We believe there is no rational commercial reason that would allow producers in Thailand to reduce reported customs values by $50 dollars per ton in order to reduce 201 duties paid during a period of higher steel prices and pipe and tube prices in Asia, and for that matter higher steel prices and pipe and tube prices in the U.S. market during 2002.
The same is true of pipe nipples from China, a product produced by Wheatland’s Seminole Tubular Division, and other members of the CPTI. Pipe nipples obtained 201 relief in the pipe fittings category of an additional 12% tariff. However, as seen in the attached chart, after the imposition of 201 relief, pipe nipple imports from China actually increased by more than 50% despite the imposition of the 12% Section 201 tariffs. Thus, the nipple industry has continued to experience a serious injury even after receiving 201 relief.
The biggest problem for the pipe and tube industry has been the tremendous import surge in imports from excluded countries since the period of 201 relief was granted. In particular, imports of welded pipe and tube other than OCTG from India and Turkey have surged incredibly. As demonstrated on the attached chart, imports form India and Turkey, which each accounted for below 3% of total imports of welded pipe and tube in 1996 and 1997 each accounted for more than 4% of imports in 2002. On a monthly basis, imports from India and Turkey increased from 2-3,000 tons a month in 2000 to almost 10,000 tons a month from each country in the 9 months of 2002 after 201 relief was granted. Incredibly, there were 28,000 tons of welded pipe and tube other than Oil Country Tubular Goods (OCTG) imports from India in January 2003 and 17, 000 tons of imports from Turkey in January 2003. Imports from just these two excluded countries accounted for 22% of total welded pipe and tube imports subject to the 201 remedy in January. The welded pipe and tube industry has seen relief under the 201 program seriously undermined by these rapid import surges. The CPTI 201 coalition filed a petition in September 2002 with Secretary Evans and Ambassador Zoellick requesting action against these import surges from Turkey and India. No action to impose 201 duties against imports from these countries has been taken.
As a consumer of 800,000 tons of flat rolled steel annually, and as a part of a trade association whose members consume approximately 8 million tons of flat rolled steel annually, Wheatland and the CPTI 201 Coalition support Administration efforts to preserve and revitalize an efficient flat rolled steel industry in the United States. Prior to the imposition of 201 relief, the U.S. had witnessed the permanent closure of Gulf States Steel of Gadsden, Alabama, and the closure of all of the LTV steel mills, Trico, Geneva Steel and Acme Steel. Since the imposition of 201 relief all of these mills except Geneva have reopened. In addition, significant suppliers of steel to Wheatland and other CPTI members such as Wheeling Pittsburgh, Bethlehem Steel and National Steel were in Chapter 11 bankruptcy and in peril of being closed down and liquidated. Many other flat rolled steel producers including Weirton Steel, Rouge Steel and WCI Steel were facing serious financial pressures and were in danger of bankruptcy. The steel 201 program has now produced significant consolidation, restructuring and reinvestment in the flat rolled steel industry. Wheatland Tube and other CPTI members believe that the long term health of the pipe and tube industry will require healthy, efficient, and world class cost competitive flat rolled steel producers in the United States. Wheatland and the CPTI do not wish to be dependent upon foreign steel in the future to supply steel to pipe and tube mills. But for the imposition of 201 relief, it is quite likely that after the closure of domestic mills there would have been surges of imported flat rolled steel to furnish the U.S. market instead of the reopening of domestic supply. We are pleased that domestic steel mills have been reopened and are hopeful that new management and new labor agreements with the USW will result in the reinvigoration of the domestic steel industry.
