DETROIT — After decades of getting bashed by imports, American steelmakers, buoyed by a falling dollar and by cost-cutting measures that have made them far more competitive, are turning the tables on their biggest foreign rival. For the first time in memory, they are starting to export U.S.-made steel in large quantities to Japan, industry officials said Monday.
Steel industry executives acknowledged that their new ability to export steel to Japan--traditionally the largest single exporter of steel to the United States--is due largely to the dramatic decline in the value of the dollar against the Japanese yen, which makes American goods cheaper in Japan, while also making Japanese products more expensive here.
Indeed, America's entire heavy manufacturing base seems to have become far more cost-competitive with Japan's basic industries in recent months as a result of the rapid change in the exchange rate between the currencies of the two nations.
For example, Honda Motor Co. now says that its U.S. plant can produce cars at least as cheaply, if not more so, as its Japanese facilities, and plans to export cars from Ohio to Japan if the exchange rate remains at current levels over the next two to three years.
"We think that, for the first time in 30 years, we have lower costs of producing steel for our customers in the United States than the Japanese steel industry has in providing steel to their customers in Japan," said USX Corp. Chairman David M. Roderick at a press conference here Monday before the company's annual meeting.
Roderick said that USX, the nation's largest steelmaker, is now in the process of having its steel certified for entry into Japan by the Japanese government. After winning certification, USX--formerly U.S. Steel--plans to ship between 20,000 and 40,000 tons of steel from its Gary Works in Gary, Ind. to Japan in 1987.
Roderick and other USX officials refused to identify the type of steel to be exported or its customer in Japan, but industry sources said USX would be exporting hot-rolled coils, a low-grade steel used in a wide variety of applications.
Breaks Decades-Long Trend
Thomas C. Graham, president of USX's steel division, said Monday that he thinks this will be the first time USX has exported steel in significant amounts to Japan in decades. "You can say that this is the first time in the memory of man," Graham quipped.
Other American steel producers are making inroads into the Japanese market as well. Bethlehem Steel Corp. officials revealed Monday that their firm began exporting steel to Japan last November; industry sources said Bethlehem shipped about 30,000 tons of hot-rolled coils to Japan in separate shipments in November and January. Although it hasn't shipped steel to Japan since, a Bethlehem spokesman added that the company plans to continue its Japanese export program because of the opportunity provided by the yen's rise. Chaparral Steel Co., a small, highly efficient steel producer in Dallas, also confirmed industry reports that it is planning to export structural steel products for the construction market in Japan.
Japan Still Dominates
Although the American steel exports will be small compared to Japan's steel shipments to the United States, which totaled 4.4 million tons in 1986, they still represent large customer orders--as well as a dramatic turnaround in the worldwide competitive climate in steel.
Indeed, U.S. steel exports to Japan had been almost non-existent before last winter, totaling just over 6,000 tons a year in 1985. The American steel industry, beset with a glut of steelmaking capacity and plagued by billions of dollars in losses, was having enough trouble just hanging on to its U.S. customer base, without having to worry about competing overseas.
But the rapid appreciation in the value of the Japanese yen has suddenly taken away Japan's vaunted cost advantage in manufacturing, making Japanese steel too costly on world markets. As a result, Japan's steelmakers are now losing money and laying off thousands of workers, a painful process that American steelmakers began more than five years ago.
In fact, the Draconian cost-cutting programs followed by USX and the other domestic steel companies are now starting to make them competitive in international markets for the first time in decades.
Industry analysts note that, thanks to massive layoffs, plant closings and streamlined production methods, USX has reduced its labor costs from 10 man-hours per ton of steel in 1980 to 4.5 man-hours per ton today; by contrast, Japanese steelmakers are still burdened by labor costs of about 6 man-hours per ton, analysts estimate.
At the same time, the traditional gap in wages between American and Japanese steelworkers is shrinking, analysts say. American labor rates in the steel industry have declined to about $22 per hour, after several rounds of wage concessions granted to the major producers by the United Steelworkers, while the yen's rapid rise has pushed Japanese labor rates over $18 per hour in dollar terms, analysts say.
The combination of lower costs per ton and relatively competitive wage rates makes U.S. steel cheaper than steel made in Japan, industry officials said.
"We now have lower production costs than the Japanese for two reasons--the severe change in the yen-dollar relationship, and because of the fact that we have been forced to reduce our costs faster than our foreign competitors," during the U.S. steel industry's wrenching crisis over the last five years, Roderick said.