Korean imports of oil and gas drilling pipes surged by 40 percent between 2010 and 2012, while domestic manufacturers' margins fell by from 13.6 percent in 2010 to 9.8 percent in 2012, according to International Trade Commission testimony Tuesday.
U.S. Sen. Sherrod Brown testified before the commission, urging the agency to protect American steel manufacturers and the jobs they support by adding tariffs to the imports.
Testimony before the ITC came as the latest step of an ongoing foreign trade case that originated in December when nine U.S. producers of Oil Country Tubular Goods, or OCTG, argued that nine foreign countries were using unfair trade practices that were so serious it could ultimately shut them down.
The complaints came from Vallourec Star in Youngstown, TMK IPSKO in Brookfield, U.S. Steel and six others.
The unfair competition also has affected Warren's JMC Steel. All these companies make oil country tubular goods for a range of companies that drill for oil and gas.
On Friday, the U.S. Department of Commerce agreed with the companies, ruling that steel pipes dumped from the nine countries have adversely affected domestic operations.
Testimony of Senator Sherrod Brown
U.S. International Trade Commission Hearing on Oil Country Tubular Goods
Tuesday, July 15, 2014, Washington, D.C.
Madam Chair Broadbent and members of the Commission, thank you for the opportunity to testify on this case on behalf of four Ohio companies representing thousands of workers from my state and across the country.
The oil country tubular goods, or OCTG, producers in Ohio include US Steel in Lorain, JMC in Warren, TMK in Brookfield, and Vallourec in Youngstown. The workers at these companies make oil country tubular goods for a range of companies that drill for oil and gas.
And like other industry leaders in Ohio, these Ohio workers and manufacturers can compete with anyone in the world. But not if our trading partners are employing unfair trading practices designed to put our companies out of business. That is precisely what is happening in the case before you today.
Nine U.S. companies with facilities across the country filed a case against OCTG producers in nine countries who are dumping products in our market. Two Korean OCTG producers named in the case represent the biggest share of imports flooding our market. But they have no domestic market of their own.
Let me repeat that. There is no drilling for oil and gas in the Korean market, and their entire business is for export to the United States.
Even though we're in the middle of a natural gas boom in this country, by some estimates as much as half of the pipe being used to drill for oil and gas is foreign produced.
This isn't because American companies don't make the right products or aren't competitive. It is because foreign companies are trying to put them out of business by engaging in illegal price discrimination in our market.
If we allow this to go unchecked, the American companies may go out of business.
Industry statistics show that demand for OCTG goods grew by 43 percent between 2010 and 2012. Unfortunately, domestic producers did not benefit from this increase in demand because they were being shut out of the market by underpriced imports flooding the market.
Between 2010 and 2012, imports from Korea surged from approximately 500,000 metric tons to about 800,000 metric tons, and these are conservative estimates. Over the same timeframe, the domestic industry operating margin fell from 13.6 percent in 2010 to 9.8 percent in 2012.
This decline in operating margin isn't attributable to old equipment or outdated technology. In fact, quite the opposite.
U.S. industry invested millions of dollars in their facilities to remain the most competitive in the global market place.
U.S. Steel spent $100 million on a heat and treat and finishing facility that created 100 new full-time jobs at their Lorain, Ohio facility.
TMK is one of the largest producers of OCTG in the world, with a facility in Brookfield, Ohio. Since 2008, the company has invested over $2 billion in their U.S. operations.
Other companies made similar investments to stay on the cutting edge of the industry.
Instead of expanding production and hiring more workers as a result of these investments, however, our companies are laying off their workers as a result of the injury these imports have caused throughout the industry.
TMK announced plans a few months ago to reduce operating hours at three of its facilities and completely idled another one.
In their press release announcing the bad news, the company said "we have seen intense pressure from low-priced and unfairly traded imports for more than a year and a half."
Vallourec invested $1 billion in their OCTG mill in Youngstown, where they employ 350 employees. Even with this state-of-the-art investment, the mill is struggling to compete against Korean OCTG in the U.S. market.
JMC in Warren, Ohio is another leading producer of OCTG products.
They have instituted layoffs of more than 100 workers in their three plants, including the one in Ohio. These layoffs have been directly related to the surge of foreign imports.
I've been to each of these factories. I've seen the investments they've made. I've witnessed firsthand how competitive these facilities are, and how much pride the workers have in their products
I know what is at stake with this case.
These unfairly traded imports are putting Americans out of work and damaging our steel companies.
We have been here before.
In the third quarter of 2008, Chinese imports accounted for nearly 100 percent of U.S. consumption. By the time domestic manufacturers had filed an anti-dumping case against Chinese producers, every major U.S. OCTG facility was either shut down or using less than 30 percent of its capacity.
The affirmative determinations of Commerce and the Commission in that case gave companies the relief they needed, but only after the businesses and workers suffered significant damage that left communities reeling.
Ohio companies have told me that the Korean OCTG imports have replaced the Chinese imports and are on track to exact the same damage to our steel sector.
At a time when our oil and gas industry is booming, American steel producers should be benefiting as well.
It is a matter of economic security for the steel sector and the communities where they have facilities. But, it is also a matter of economic stability for our country overall.
Declines in the steel sector will reverberate throughout our economy. The auto sector, the natural gas sector, the infrastructure sector all of these industries will be injured if we do not stop OCTG imports from being dumped in our market.
Our trade remedies, when properly applied, defend against the type of unfair competition currently faced by the U.S. OCTG industry and its workers.
The producers and workers in Youngstown, Warren, Lorain, and Brookfield and across Ohio can compete with anyone as long as it's level playing field.
And that's what this case is about today. Thank you very much for the attention you have given these issues and the petition.
I urge you to examine closely the record and testimony given today and to make an affirmative final determination.
Tuesday, the fight continued before the ITC.
If the ITC determines that steel dumping has materially injured American manufacturers, then trade tariffs can be levied against those imports.
"Two Korean OCTG producers named in the case represent the biggest share of imports flooding our market. But they have no domestic market of their own," Brown testified.
"There is no drilling for oil and gas in the Korean market, and their entire business is for export to the United States.
"Even though we're in the middle of a natural gas boom in this country, by some estimates as much as half of the pipe being used to drill for oil and gas is foreign produced."
Brown argued that while the U.S. industry has invested millions in domestic facilities, producers remain unable to compete with the unfairly subsidized and dumped foreign-made products.
"Vallourec invested $1 billion in their OCTG mill in Youngstown, where they employ 350 employees. Even with this state-of-the-art investment, the mill is struggling to compete against Korean OCTG in the U.S. market," Brown said.
The ITC is expected to make a decision on tariffs by early August.