NCPA - National Center for Policy Analysis

In The Wake Of Tarrif Protection, Steel Makers Singing Happier Tune

May 6, 2002

Until a few weeks ago, the steel industry was warning that without steeper tariffs against imports it might not survive. Courtesy of President Bush, it got tariff hikes of 8 to 30 percent, and steel executives are saying that market conditions have improved much more quickly than anticipated.

  • Steel prices have climbed steeply -- the average market price of hot-rolled steel has climbed from $215 a ton in November to $290 in April, with the prospect of more than $300 a ton in May.
  • Steel stocks have performed better than many other sectors in recent months -- with the Dow Jones American steel index climbing more than 40 percent since September.
  • With bankruptcies and reorganizations curtailing capacity over the past year, production of raw steel in 2001 was 11.5 percent lower than the previous year.
  • The tariffs, which one steel executive has described as "a little bit of gravy," have had the effect of choking off low-priced foreign supplies -- making it easier for domestic producers to raise prices.

Those listening to statements by steel companies in recent weeks may be excused for wondering whether this is the same industry that a few months ago was warning its very survival was at risk, observers say.

Meanwhile, President Bush's tariff gift has ignited trade retaliations by Europe and Japan that threaten to harm other U.S. producers, including Florida citrus growers.

Source: Bernard Simon, "Tariffs Won, Steel Sings New Tune," New York Times, May 5, 2002.


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