Steelmakers, Buyers Consider Petition to Limit Scrap Exports

A growing coalition of steel producers and consumers is considering whether to petition to limit soaring exports of scrap steel and is talking with the U.S. Commerce Department about the issue.

Both steel makers and buyers, who were on opposite sides of the steel tariffs enacted by the White House two years ago, say growth in exports to Asia and elsewhere has sent scrap prices soaring. If limits are granted, they would mark the first such restrictions on scrap exports in three decades.

Among those meeting with the Commerce Department last week were representatives of DaimlerChrysler AG; the Steel Manufacturers Association, which consists of about half of the U.S.'s steel makers; and the Forging Industry Association, which represents foundries. A spokesman for DaimlerChrysler said "we were there to raise awareness of what is happening in the steel market." The group has adopted the "Emergency Steel Scrap Coalition" as its name.

Peter Lichtenbaum, assistant secretary for export administration, said the Commerce Department rarely imposes such short-supply restrictions.

Steel makers, particularly those running electricity-fired furnaces called minimills that produce about one-third of the world's steel, use scrap as a raw material to make new steel products. Steel scrap is one of several steel-related materials that has risen in price in recent months, in large part due to China's voracious appetite. The U.S. is the world's largest producer of steel scrap.

A petition, which the companies hope to apply for within 30 days, wouldn't guarantee action from the Bush administration. Steel-related trade restrictions could be a nightmare for the administration, whose steel tariffs were met with opposition from their March 2002 implementation until they ended late last year. Limiting or reducing exports at a time when the trade deficit is high would likewise raise thorny questions about the Bush administration's resolve to reduce it.

Under the Export Administration Act, industry groups can petition the Commerce Department's Bureau of Industry and Security to prohibit or curtail the export of goods if prices rise or shortages are created. The department can act on all or part of the petition within 15 days if it chooses or simply increase monitoring.

The U.S. exported an estimated 12 million metric tons of steel scrap last year, a 21% increase from 2002, according to the U.S. Geological Survey. The price of scrap has jumped to as much as $350 a ton from $100 to $150 a ton last year at this time, as more scrap has left the U.S., say industry analysts.

Bob Stevens, chief executive of Impact Forge Inc., a metal-forging company in Columbus, Ind., who was present at the Commerce Department meetings, said his company cut its work force to 530 workers, down from 950 over the past few years, in part because it had to pay more for scrap.

Nucor Corp., one of the nation's largest steel makers, would welcome restrictions and has given some legal assistance but hasn't been actively involved in meetings with the Commerce Department. The Steel Manufacturers Association, which represents minimill operators, is to meet this week to decide whether to back the effort as a group.

If the petition is acted upon, the U.S. wouldn't be the first country to limit exports in response to the recent run-up in prices. The Ukraine placed a duty on scrap exports last year.

Already, opposition is forming. Lewis Leibowitz, a Washington attorney representing steel-tariff opponents, said restrictions could hurt the market but they wouldn't necessarily lower prices. The Washington-based Institute of Scrap Recycling Industries Inc., which represents scrap dealers benefiting from scrap prices, said it retained a law firm to fight the move.

Scott Horne, counsel and managing director of government relations for the institute, said similar export controls of scrap steel in 1973-74 -- when exports to Japan and Korea were booming -- didn't stop further price increases. But advocates of the restrictions said those same limits also helped curb a domestic shortage of scrap.