After briefly subsiding in July, steel imports surged again in August, according to industry statistics released Friday, thus providing further evidence that the Reagan Administration's quota program has so far failed to stem the rising tide of foreign steel entering the U.S. market.
The surprisingly large leap in import statistics for August came as a major disappointment to the domestic industry, which had hoped that July's decline was a sign that the Reagan quotas were starting to work. Over the past week, the major domestic steelmakers have been announcing price increases for sheet steel--used in large appliances, automobiles and other big-ticket items--but analysts said Friday that those increases may not stick in the face of the current upturn in imports.
"I don't think the market (for domestic steel) is strong enough to support price increases," said John Jacobson, a steel industry analyst with Chase Econometrics, an economic forecasting firm.
On Friday, the American Iron and Steel Institute, a domestic industry trade group, reported that imports of finished and semi-finished steel products in August rose to 2.029 million tons, up 28.7% from July's level of 1.577 million tons. The share of the market held by imports also rose, from 21.9% in July to 25.0% last month, the institute said. For the first eight months of 1985, the import market share has risen to 25.4%, compared to 25.4% during the same period in 1984.
The institute said the increase was led by rising shipments from developing countries and continued high shipment levels from the Common Market. Imports from Japan also rose, while shipments from Canada fell during the month, the institute reported. (Steel industry officials in California, meanwhile, said West Coast import levels, which have not fluctuated as much as the national figures recently, apparently held steady in August at July's levels. Actual West Coast statistics for August were not available, however.)
While imports have been climbing, domestic raw steel production continues to be severely depressed. Although it rose slightly in August, U.S. steel production so far this year remains nearly 10% below the very low levels of 1984.
The flood of imported steel has continued despite the efforts of the Reagan Administration to staunch the flow in order to protect the domestic industry. Last October, the United States began a five-year quota program that was supposed to limit the market share held by imported finished steel to 18.5%, while capping the combined market share for finished and semi-finished imported steel at 20.2%.
But with the first year of the quotas almost complete, it is clear that the Reagan program has failed to meet its targets. The steel institute now forecasts that the import market share for both finished and semi-finished steel for the first quota year, from Oct. 1, 1984, to Sept. 30, will hit 26%.
"The 25% market share for steel imports in August . . . is a bitter disappointment and completely contrary to the President's import restraint program,' complained Donald B. Trautlein, chairman of the steel institute and also chairman of Bethlehem Steel.
Separately Friday, Bethlehem said the industry's slump was forcing it to reduce its pay and benefit plans for about 10,000 salaried workers in order to save the company $45 million a year. The cuts include a 10% reduction in pay for upper management and a 5% pay cut for all other salaried employees.
Still, domestic industry officials gave no hints Friday that the major steelmakers plan to step back from their recently announced price increases for sheet steel.
Late last week, U.S. Steel said it would effectively raise its sheet steel prices on Jan. 1, and several other big producers, including LTV Steel, Bethlehem, Inland Steel and National Steel, have announced similar moves this week.
Long-term contracts with major customers like the Big Three auto makers would not be affected, but other makers of consumer products might take the brunt of the sheet price increases. Also this week, some steel producers have announced price increases for tin-mill products as well.
Get Out of Trap
The industry apparently still hopes the price increases announced over the last week will help them get out of the trap of competing with imports by offering steep discounts, only to find themselves then making money-losing steel.
But analysts worry that import levels are still too high to support a more aggressive domestic pricing strategy.
"I think their price increases will be difficult to sustain with this kind of import level and with so much excess inventory out there," said Robert W. Crandall, an economist at the Brookings Institution and a specialist in the steel industry. "With demand not rising and steelmaking costs (both in the United States and overseas) continuing to fall, the pressure to cut prices is likely to increase for the foreseeable future," Crandall added.
"Going back over 2 million tons in import shipments (in August) really gives everybody something to think about," said Jacobson of Chase. "And it should make any further price increases difficult through the rest of the year."