- The Washington Times - Tuesday, February 11, 2003

U.S. steel companies are selling more to China as strong demand there, coupled with a soft domestic market and weaker currency, offer at least a short-term window for exports, according to steel-industry analysts.
"The Chinese market is a very robust market at this point in time. I can't tell you how long the opportunity will exist, but in the weak [U.S.] market we have it's helped out our business," said Keith Busse, president of Steel Dynamics, a Fort Wayne, Ind., steel manufacturer.
U.S. steel companies have faced a number of problems in recent years, including stiff foreign competition, declining domestic prices; and legacy costs, such as pensions, that have driven firms to bankruptcy.
China's strong economic growth is helping create a new market for some companies.
Steel Dynamics, for example, has agreements to sell about 70,000 tons of steel to China during the first three months of the year and is working on contracts for the second quarter, Mr. Busse said. The company had exported very little, and then only to Germany, in the past, he said.
"It is a new market opportunity for us and for other companies," he said.
Those others include firms such as Nucor, the country's second-biggest producer, which last week said it would export 275,000 tons in the first quarter, much of it to China. Robert Johns, director of marketing for Nucor's sheet-mill group, said that in recent years the firm has exported nothing there.
"U.S. mills are starting to export large amounts of steel to China," said Charles Bradford, a New York-based steel analyst. "China is sucking up steel from all over the world."
Mr. Bradford estimated that U.S. firms will export about 1 million tons of steel to China during the first three months of this year.
Official figures for the quarter are expected in May, but in the past two years U.S. steel exports to China rose slightly. Last year they reached $518.6 million through the end of November, according to government figures.
The new sales reflect China's rapidly growing economy, which saw imports of finished steel products jump 42 percent in 2002 and overall consumption rise more than 25 percent, Mr. Bradford said.
Firms speculate that infrastructure development, building construction and increased manufacturing are driving up steel demand and price.
U.S. firms hope the trend will last.
"We are very optimistic about the future," said Robert Philip, president of Schnitzer Steel Industries, a Portland, Ore.-based steel recycler and manufacturer. Mr. Philip said China's major infrastructure developments mean the market for scrap should grow.
Foreign markets have been especially appealing because U.S. steel prices have been falling since mid-2002, despite tariffs as high as 30 percent imposed by the Bush administration in March.
"The United States has the lowest prices of any consuming area of significance in the world," Nucor's Mr. Johns said.
Hot-rolled sheet steel prices in January were $300 per ton in the United States but $310 per ton worldwide, according to Purchasing Magazine, a publication that tracks steel markets. Those figures do not include transportation costs, which can add about $75 per ton.
The U.S. market's falling prices reflect limited demand and capacity that had been shut down coming back on line as the industry consolidates and companies like Nucor and International Steel Group acquire and ramp up production at bankrupt firms, analysts said.
A relatively weak dollar also has made U.S. products more attractive in overseas markets.
Analysts warn that the U.S. export phenomenon may be short-lived.
"I don't anticipate the United States being a long-term exporter of steel to China," said William Peluchiwski, managing director of the metal industries group at Houlihan Lokey Howard & Zukin, an investment bank.

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