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Prepared by:Martin Associates941 Wheatland Ave., Suite 203Lancaster, PA 17603 April 18, 2018
www.martinassoc.net
RELATIONSHIP BETWEEN STEEL IMPORTS AND U.S. STEEL INDUSTRY CAPACITY UTILIZATION
Justification of Recommended Action Under Section 232 on Steel Imports
Current quantities of imported steel weaken internal economy Potential impact on limiting capacity of U.S. steel industry in a national emergency
due to additional plant closures “Secretary has determined that the only effective means of removing the
impairment is to reduce import levels that should, in combination with good management, enable U.S. steel mills to operate at 80% or more of their rated production capacity”
“Due to the threat as defined in Section 232, to national security from steel imports, the Secretary recommends that the President take immediate action by adjusting the level of these imports through quotas or tariffs. The quotas or tariffs imposed should be sufficient, even after any exceptions (if granted), to enable U.S. steel producers to operate at an 80% or better average capacity utilization rate based on available capacity in 2017.”
Source: The Effect of Imports of Steel on the National Security, An Investigation Conducted Under Section 232 of the Trade Expansion Act of 1962, As Amended, U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation, January 11, 2018
2
Steel Industry Capacity Utilization Has Remained Below Post Recession Levels
0%
20%
40%
60%
80%
100%
120%20
00Q
120
00Q
320
01Q
120
01Q
320
02Q
120
02Q
320
03Q
120
03Q
320
04Q
120
04Q
320
05Q
120
05Q
320
06Q
120
06Q
320
07Q
120
07Q
320
08Q
120
08Q
320
09Q
120
09Q
320
10Q
120
10Q
320
11Q
120
11Q
320
12Q
120
12Q
320
13Q
120
13Q
320
14Q
120
14Q
320
15Q
120
15Q
320
16Q
120
16Q
3
Perc
ent C
apac
ity U
tiliza
tion
3Source: American Iron and Steel Institute (AISI)
Total Steel Mill Products - Imports
0.0
10.0
20.0
30.0
40.0
50.0
60.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Mill
ion
Tons
4Source: American Iron and Steel Institute (AISI)
U.S. Steel Industry Capacity Utilization and U.S. Steel Mill Products Imports –Capacity Utilization Tends to Increase as Imports Increase, and Decrease When Imports Decrease
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 20160.0
10.0
20.0
30.0
40.0
50.0
60.0
% C
apac
ity U
tiliza
tion
Mill
ion
Tons
Imports Capacity
5Source: American Iron and Steel Institute (AISI)
U.S. Durable Goods Manufacturing Output and Steel Mill Products - Imports
0.0
10.0
20.0
30.0
40.0
50.0
60.0
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Mill
ion
Tons
Billi
ons o
f Cur
rent
$
Durable Goods Manufacturing and U.S. Steel Mill Products Imports
Durable Goods MFR Imports
Steel mill products imports move with the value of output of U.S. Durable Goods Manufacturing
6Source U.S. Bureau of Economic Analysis and AISI
U.S. Durable Goods Manufacturing Output and Steel Industry Capacity Utilization
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
% C
apac
ity U
tiliza
tion
Billi
ons o
f Cur
rent
$
Durable Goods Manufacturing and US Steel Capacity Utilization
Durable Goods MFR Capacity
7
U.S. steel industry capacity utilization is positively correlated with the value of output of U.S Durable Goods Manufacturing
Source U.S. Bureau of Economic Analysis and AISI
U.S. Steel Price Relative to China Steel Price and Steel Industry Capacity Utilization
0%
20%
40%
60%
80%
100%
120%
0
0.5
1
1.5
2
2.520
00Q
120
00Q
320
01Q
120
01Q
320
02Q
120
02Q
320
03Q
120
03Q
320
04Q
120
04Q
320
05Q
120
05Q
320
06Q
120
06Q
320
07Q
120
07Q
320
08Q
120
08Q
320
09Q
120
09Q
320
10Q
120
10Q
320
11Q
120
11Q
320
12Q
120
12Q
320
13Q
120
13Q
320
14Q
120
14Q
320
15Q
120
15Q
320
16Q
120
16Q
3
% C
apac
ity U
tiliza
tion
US
Stee
l Pric
e/Ch
ina
Stee
l Pric
e
US Price Relative to China Capacity
U.S. steel industry capacity utilization declines as the U.S. price of steel falls relative to China price of steel, and increases with an increase in US steel prices relative to China price of steel
8Source: Steel Benchmarker Data and AISI
U.S. Steel Price Relative to World Steel Price and Steel Industry Capacity Utilization
0%
20%
40%
60%
80%
100%
120%
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
220
00Q
120
00Q
320
01Q
120
01Q
320
02Q
120
02Q
320
03Q
120
03Q
320
04Q
120
04Q
320
05Q
120
05Q
320
06Q
120
06Q
320
07Q
120
07Q
320
08Q
120
08Q
320
09Q
120
09Q
320
10Q
120
10Q
320
11Q
120
11Q
320
12Q
120
12Q
320
13Q
120
13Q
320
14Q
120
14Q
320
15Q
120
15Q
320
16Q
120
16Q
3
% C
apac
ity U
tiliza
tion
US
Stee
l Pric
e/W
orld
Ste
el P
rice
US Price Relative to World Price Capacity
U.S. steel industry capacity utilization declines as the U.S. price of steel falls relative to World price of steel, and increases with an increase in US steel prices relative to World price of steel
9Source: Steel Benchmarker Data and AISI
Steel Industry Capacity Utilization During Section 201 of the Trade Act of 1974 – March 2002 Through December 2003
0%
20%
40%
60%
80%
100%
120%20
00Q
120
00Q
320
01Q
120
01Q
320
02Q
120
02Q
320
03Q
120
03Q
320
04Q
120
04Q
320
05Q
120
05Q
320
06Q
120
06Q
320
07Q
120
07Q
320
08Q
120
08Q
320
09Q
120
09Q
320
10Q
120
10Q
320
11Q
120
11Q
320
12Q
120
12Q
320
13Q
120
13Q
320
14Q
120
14Q
320
15Q
120
15Q
320
16Q
120
16Q
3
Capacity Utilzation
U.S. steel industry capacity utilization actually declined during imposition of Section 201 from 90.7% in second quarter 2002 to 79.2% in fourth quarter 2003, and then increased after the tariffs were lifted
Imposition of Section 201
10Source: AISI
Steel Industry Capacity Utilization During Section 201 of the Trade Act of 1974 – March 2002 Through December 2003
60%
65%
70%
75%
80%
85%
90%
95%
100%
2002Q1
2002Q2
2002Q3
2002Q4
2003Q1
2003Q2
2003Q3
2003Q4
2004Q1
2004Q2
Capacity Utilzation
U.S. steel industry capacity utilization actually declined during imposition of Section 201 from 90.7% in second quarter 2002 to 79.2% in fourth quarter 2003, and then increased after the tariffs were lifted
Imposition of Section 201, March 2002
Removal of Section 201, December 2003
11Source: AISI
Conclusions
There does not appear to be a relationship between steel imports and U.S. steel industry capacity utilization During the imposition of Section 201 import tariffs, the capacity
utilization of the U.S. steel industry actually declined (March 2002 to December 2003) The imposition of the Section 201 steel import restrictions cost the
U.S. Marine Transportation System 22 million person hours, $77.3 million of Federal Taxes and $391 million of output to the U.S. Economy (The Economic Impact of the Section 201 Import Restrictions on the Marine Transportation System, 2006 by Martin Associates for the American Institute for International Steel) The proposed 25% tariffs on Steel Imports are projected to cost the
U.S. Economy a loss of 146,000 jobs (The Trade Partnership - Laura Baughman)
12
Steel Imports by Mode 2003-2017 - Water Transportation Accounts for More than 75% of Steel Imports
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%20
03
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Land ValueAir ValueVessel Value
Source: USA Trade OnLine
Steel Imports by Water and Source Country
- 5,000
10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000
All Others
Canada
Thailand
Italy
Netherlands
Vietnam
India
Mexico
Germany
Japan
Taiwan
Turkey
Russia
South Korea
Brazil
China
Source: USA Trade OnLine
Steel Imports by Water by Country of Export –Brazil is Growing, while China’s Share Has Fallen
0%10%20%30%40%50%60%70%80%90%
100%All Others
Canada
Thailand
Italy
Netherlands
Vietnam
India
Mexico
Germany
Japan
Taiwan
Turkey
Russia
South Korea
Brazil
China
Source: USA Trade OnLine
The 34.4 Million Tons of Imported Iron and Steel Handled at the Nation’s Seaports in 2016 Supported the following:
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Economic Activity at Risk Due to Steel Import Restrictions
84,000 direct, induced and indirect jobs in the Marine Transportation System handling the imported iron and steel products An additional 1.2 million jobs with users of the imported iron
and steel products Potential impact on 47 million tons of grain exported via Lower
Mississippi River ports in 2016- Empty steel ships provide backhaul for grain exported via the Lower
Mississippi River- 10,830 direct, induced and indirect jobs created by these grain exports on
the Marine Transportation System- An additional 39,000 jobs are supported in U.S. agricultural sector
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About Martin Associates
Founded in 1986 More than 1,000 economic, planning, feasibility and logistics studies
for ports, ocean carriers, terminal operators throughout the U.S., Canada, Europe, South America, Caribbean and Asia Key economic impact studies of national importance:
- Economic Impact of the Section 201 Steel Import Quotas- Economic Impact of the 2002 West Coast Shutdown used in enactment of
Taft Hartley- Economic Impact of the U.S. Port System for the American Association of
Port Authorities, 2015- Economic Impact of the West Coast Port Slowdown in 2014-2015 during
labor/management contract negotiations
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