After more than four years of banner prices and profits, U.S. steel producers are hurting. Demand is slack and prices are low because sales of automobiles and appliances are down and residential construction is weak. So it’s not surprising that U.S. steel producers were dismayed when imports of Chinese finished steel products in October reached 713,000 net tons, an all-time monthly high.

“America’s steel producers will not allow the U.S. market to become again a dumping ground for unfairly traded steel from offshore,” Thomas J. Gibson, president and chief executive of the American Iron and Steel Institute, said after hearing the news.

Tom Danjczek, president of the Steel Manufacturers Association, said U.S. imports of Chinese steel have jumped over the last three months. After peaking at about 500,000 tons per month during 2007, Chinese shipments to the U.S. had dropped to about 200,000 tons early this year before rising in recent months. U.S. steel imports from China now are averaging 600,000 tons per month, twice the monthly average a year ago, Danjczek said. 

Meanwhile, U.S. imports from other major steel suppliers have barely increased, if at all. Imports from Japan in October rose 4.8 percent from September, but shipments from three other major suppliers plummeted: South Korea, down 32.2 percent; Germany, down 11.6 percent; and India, down 58.9 percent. Danjczek said China deliberately avoided production cuts even as its domestic demand dropped, and shipped excess production to the United States, depressing U.S. prices.

Danjczek said 19 of the top 20 Chinese steel companies are government-owned, and that the sector is heavily subsidized. He said the high cost of transporting steel from China more than makes up for the country’s lower wage rates. “The Chinese have a history of dumping, and the U.S. has a very strong winning record in such cases” at the U.S. International Trade Commission, Danjczek said.

David Phelps, president of the American Institute for International Steel, which represents importers, said it was wrong to draw conclusions about longer-term trends in U.S. steel imports based on recent months’ import figures.

The lag time between orders and deliveries is usually three to five months, and most of the imports that arrived in October were ordered in June or July. Phelps said it was “entirely possible that a couple of ships were able to bring more steel” in October, but the Commerce Department reports that finished imports from China for the full year will be 2.9 percent lower than for 2007.

An unusual burst of steel imports in a month can be the result of a bunching of ships, or delays in processing import data at Customs, or a storm at sea, or other reasons. “There are dozens of possible explanations,” Phelps said. 

Looking ahead, Phelps said U.S. steel imports for November 2008 could be as high as they were in October because those orders were placed last June through August when no one foresaw the extent of the global economic downturn. Now, new orders for foreign shipments are way down, he said, because demand from manufacturers who use steel is weak.

What does that mean for steel imports? Phelps expects a big fall-off in imports in January, and probably an even bigger drop in February. “It is hard to be optimistic,” he said. If any optimism returns to the steel market by January, it won’t show up in import statistics until at least April.

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