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Price hikes, allocation problems, long lead times continue to plague steel consumers

Norwalk, CA - Member companies of the Consuming Industries Trade Action Coalition (CITAC) Steel Task Force provided testimony today in a House Small Business Committee field hearing, "Federal Procurement and International Trade: Assessing The Federal Government's Efforts To Meet The Needs Of Local Small Businesses," organized by Chairman Donald Manzullo (R-IL) and Committee Member Grace Napolitano (D-CA).

John Reynolds, General Manager of Mace Metal Sales in Los Angeles said even though his company supports the domestic mills, they do not support the 30 percent tariff imposed by the Bush Administration in March that has created an environment in which small companies like Mace are losing business fast. Mace is a service center, buying steel from mills and providing steel products and processing services to steel-consuming companies.

Most of the problems for small businesses are a result of the 30 percent tariffs imposed by President Bush on steel imports and/or the onslaught of dumping cases brought by U.S. steel producers. Together, these actions isolate the domestic steel industry from international markets, driving up steel prices and causing supply shortages for American steel users. These American steel users in turn must compete with imports of finished products produced overseas with locally produced, lower-cost steel.

"Never before have the prices increased at this rate. Since March 2002, depending on the product…we have seen 40 percent increases with more to come in the first quarter of next year, and who knows how much more after that," stated Reynolds. Mace customers have asked the company to cut costs by 10 percent because 40 to 50 percent of the price of products metal stampers manufacture is raw material costs.

Reynolds described the conditions causing him to lose business: "If you don't have steel, you can't sell it. Mace's steel supply has been cut back by roughly 30 to 40 percent." Domestic mills cannot meet U.S. demand for steel, creating allocations, shortages and ultimately, lost business for Mace and its customers.

Uncertainty in the market has made planning particularly difficult for small businesses. According to Reynolds, "In July, we were asked to place orders through the end of the year. This is a six-month lead time, which is way too long…if we receive new inquiries, we cannot quote them because all of our allocation has been ordered and booked." In addition, one supplier informed Mace they would need to reduce fourth quarter allocations by another 400 tons because the mill was unable to produce it. "Why are we forced to pay the price because of the mill's failure?"

In closing, Reynolds reminded the Committee that while his small business may not seem significant in the larger picture, "don't forget that there are thousands of small companies out there just like us." In the 34th district of California, there are 157 steel-consuming jobs for every one steel-producing job, and in the state as a whole, there are even more steel-consuming jobs - 178 for every one steel-producing job.

The California field hearing follows on the heels of a July 23 meeting of the Small Business Committee in Washington, DC. Chairman Manzullo invited steel users to testify before the Committee after receiving more than a hundred letters from downstream users suffering serious dislocations from the Bush Administration's 201 tariff decision.

Over the last two weeks, steel-consuming companies have also taken their stories directly to lawmakers in their home districts, meeting with members of Congress from Iowa, Illinois, Wisconsin, Massachusetts and Connecticut.

CITAC's President Jon Jenson says the Small Business Committee hearings and district meetings are only part of the strategy for the thousands of small businesses that use steel. "Steel consumers intend to make their mark in this November's election. Every state in the U.S. has more jobs in steel-using companies than jobs in steel-producing companies. We are out there telling our elected representatives they need to represent the majority more effectively."