Cheap imports threaten U.S. OCTG manufacturers

Steel Pipes
Source: DollarPhotoClub

The boom in shale gas exploration should be great news for Pennsylvania steel mills. Oil country tubular goods (OCTG) is a family of seamless rolled products consisting of drill pipe, casing and tubing, which oil and gas business cannot do without. Unfortunately, at present U.S. steel manufacturers are missing out on the opportunity because of huge quantities of cheaply imported goods from countries like Turkey and South Korea.

At the moment, the U.S. steel market is suffering from oversupply of OCTG caused by a surge of what appears to be “dumping” of imports from foreign countries. “Dumping” happens when large amounts of products are being imported and sold at prices lower than the costs of production. The biggest offender when it comes to OCTG is South Korea, but other countries include: India, Philippines, Saudi Arabia, Taiwan, Thailand, Turkey, Ukraine, and Vietnam.

There have been some legal steps taken to support home industry from “dumped” imports. One was the Pennsylvania Public Utility Commission pushing for the state law requiring companies to report the country of manufacture of the steel pipe used to transport unconventional gas. This is meant to encourage companies to use domestically produced steel.

Another measure was the filing of a critical trade case against the nine most active countries in July 2013. In February of this year, the U.S. Department of Commerce announced preliminary findings on the case. Unfortunately, those findings did not support imposing duties against South Korea. This is significant since South Korea is the biggest threat to the domestic market, exporting 98 percent of its production of OCTG to the United States.

The Department of Commerce will make its final determination on the pending steel case July 8, 2014. In the mean time, American steel producers organise themselves to influence the legislation that will protect their interests.

One example of such grass-roots campaigning is a rally organised by the Alliance for American Manufacturing in U.S. Steel’s Lorain Tubular Operations plant in Ohio, planned for Monday, 5 May.

“This isn’t protectionism,” said Scott Paul, the organization’s president. “(Lorain) is a highly efficient facility, and there is a potentially good market here, but these workers and manufacturers are being unfairly undercut by these imports that are under a fair market price,”

U.S. Steel was one of several steel companies that brought an anti-dumping petition before the Commerce Department, last July.

John Wilkinson, plant manager at the Lorain facility, said he believes dumping has occurred because the imported pipe has been selling for 30 percent below market value.

“At 30 percent below market value, I can barely make the product for what they are selling it for,” he said.

“They don’t have the same structure and performance based operations that we do when it comes to quality control, safety and all the things that go into products made by a great company. They don’t have the same structures of cost that we do. So when they dump their products in our market, it makes it difficult to compete.”

He said 73 of about 575 employees at the plant were laid off because of declines in business due to unfair imports.

The purpose of the rally on Monday is to raise awareness about the pending legislature and to educate people about the difficulties faced by the U.S. steel manufacturers. It will be followed by similar rallies in communities with tubular steel plants, including Fairfield, Alabama; Granite City, Illinois and McKeesport, Pennsylvania.

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