TESTIMONY OF

JOHN GROVE, VICE-PRESIDENT, PROCUREMENT
COLD METAL PRODUCTS, INC.

HEARING ON UNINTENDED CONSEQUENCES OF
INCREASED STEEL TARIFFS ON AMERICAN MANUFACTURERS

BEFORE THE
HOUSE COMMITTEE ON SMALL BUSINESS

July 23, 2002

My name is John Grove, Vice-President, Procurement, with Cold Metal Products, Inc. I am grateful for the chance to testify before this committee to tell you about the impact the Steel 201 tariffs have had on my business. As a result of the Steel 201 tariffs, we have been put on allocation by our domestic suppliers, and cannot get enough steel for our operations. We have also lost business because our customers are unwilling to pay for our increased steel costs.

Cold Metal Products is located in Swickley, PA with plants and service centers in Youngstown, OH, Indianapolis, IN, and Roseville, MI, and Ottawa where we employ over four hundred workers. Our production workers are members of the United Steelworkers local union nos. 3047 and 1999-2. We manufacture specialty and conventional strip steel to meet the critical requirements of precision parts manufacturers. We also provide value-added products to manufacturers in the automotive, construction, cutting tools, consumer goods, and industrial goods markets. As a leading maker of intermediate steel products in this country, a constant and reliable supply of raw steel material is critical to our success.

The steel tariffs imposed in March have increased the price and reduced the availability of steel to the point that our supply of steel is not reliable. Cold Metal Products has been put on allocation by three of our long-time suppliers in the U.S. - WCI Steel, Steel Dynamics, and Gallatin Steel - they simply cannot supply us with the volume of steel we need, given their capacity limitations and orders from larger customers. As a result, we have run out of steel a number of times in the past couple of months and have not been able to service our customers. We have no assurance of steel supplies past September of this year. When we are able to obtain steel, it arrives late roughly fifty percent of the time.

In addition, because of the scarcity of the steel in the U.S. market, we have been forced to accept non-negotiable price increases of $130 per ton since 01/01/92. The $130 constitutes more than a thirty percent price increase and is the largest increase in a six-month time span ever seen by Cold Metal since its founding in 1926.

Our customers have refused to pay any of these increased costs and have begun to move their business off-shore where steel is cheaper. For example, one of our long-standing customers, Stanley Tool, recently told us that they were diverting their business from us to England because the product was cheaper there. Stanley Tool also told us that they plan to send additional business to China. This loss of business has a profoundly negative effect on our company. We anticipate that we will lose more business in the future because our increased steel prices due to the Steel 201 tariffs have made us unable to compete in a global economy.

Cold Metal has long been recognized as the leading innovator in the strip steel industry, with an unmatched capability to develop products and processing that provides solutions for our customers' applications. Our business is based on providing cold-rolling, annealing, normalizing, edge conditioning, oscillate winding, slitting and cutting-to length. In order to provide these value-added specialty steel products, we must have steel to process. In the current environment of Steel 201 tariffs, however, we cannot get the steel we need.

We have done everything we can do to be a success in a very demanding marketplace. The effort to save the U.S. steel mills, however, should not sacrifice companies like ours.

Thank you.