|
Milwaukee Journal Sentinel
April 18, 2005
It's User Against Supplier; Tariffs on Foreign Steel Spark Debate
By Rick Barrett
Stainless steel costs have nearly doubled at Winco Stamping Inc. in the last two years, squeezing
profits at the Menomonee Falls manufacturer and many others like it.
At first, Winco absorbed about 40% of the price increases and hoped the trend would not last.
The company did not want to risk losing customers by including steel surcharges on orders, but
eventually it had to take some of those steps.
Now Winco is among some Wisconsin companies that want the U.S. International Trade
Commission to drop tariffs on stainless steel imported from eight countries: France, Germany,
Italy, Japan, South Korea, Mexico, Taiwan and the United Kingdom.
The commission is holding a public hearing April 26 in Washington on whether the tariffs should
be allowed to expire. If that happens, Winco and other manufacturers said, they might get some
price relief through an increase in foreign steel.
Metal fabrication shops can adopt all kinds of new technologies to become more efficient, but it
still can't offset the soaring prices of raw materials such as stainless steel, said Mike San Filippio,
Winco vice president of sales.
Last week, the commission voted 4-2 to continue tariffs on certain carbon steel from Japan, Brazil
and Russia. The U.S. metal fabrication industry had argued against the tariffs, saying U.S. steel
mills were receiving record profits and no longer needed the protection from foreign imports.
'Conditions have changed'
"It is disturbing that the U.S. government's trade policy continues to work against U.S. steelconsuming
companies," such as metal fabricators, said Bill Gaskin, president of the Precision
Metalforming Association, a Cleveland trade group with Wisconsin members.
"When steel is in short supply, small businesses are the first to suffer. They usually are
defenseless against price increases from steel suppliers, and they often have little ability to pass
along increases in steel costs to their customers. The ITC's latest decision means that some of
these small companies simply won't survive."
U.S. steel mills are much healthier than they were five years ago when tariffs were adopted,
according to Gaskin, and it's time to drop tariffs that have contributed to artificially high prices.
"Just because there was dumping five years ago doesn't mean it would happen again," he said.
"Market conditions have changed. We now have long lead times to get stainless steel, and there
are worldwide shortages."
Steel mill operators said the tariffs were meant to give the ailing U.S. steel industry a respite from
a flood of foreign competition and should remain in place.
Steel producers are starting to show profits for the first time in five years, said Peter Morici,
former chief economist of the commission.
The tariffs were adopted for good reasons, Morici said, such as protection against the dumping of
foreign-made raw materials in the United States at below-market prices.
"The underlying conditions in the global marketplace that give rise to dumping and subsidized
imports have not changed," Morici said. "If the steel market softened, we could expect the United
States to be bombarded with dumped and subsidized products. So it doesn't make sense for the
U.S. to lower its guard at this time."
The surge in stainless steel prices has been driven partly by increased costs for nickel and other
alloys used to make the material. Higher energy prices also are to blame, because it takes a lot of
electricity and fuel such as natural gas to process stainless steel.
But the global economy is slowing, and metal prices will come down on their own, Morici said.
"We are coming off a period of very robust demand for steel products," he said.
$2.57 per pound
Jane Dauffenbach, president of Aquarius Systems Inc., a North Prairie company that makes
aquatic weed harvesters, said that large quantities of stainless steel can be difficult to get, in
addition to being expensive.
Aquarius Systems' stainless steel costs are up about 50% from a year ago, with the company
paying about $2.57 a pound for the material. The time might be right to drop the tariffs,
Dauffenbach said.
"We are sympathetic to the steel industry, but maybe there's enough profit margin for them now
that their recovery can continue without tariffs and loosen things up for the rest of us," she said.
Ron Kaas, owner of Sourcemaster Co., a Milwaukee company that sells metal forgings and other
products to manufacturers, said the problem with tariffs is that they can pit one U.S. industry
against another.
"At this point, it's the metal users fighting the metal producers in this country, and that's not a
good thing," he said.
|
