Vladimir Shlyomin

By signing a special agreement with the U.S. administration Russian metallurgists again made a �voluntary� commitment not to ship plate to the United States for 8 months, from January 23 to September 30, 2003.

D

uring this period metallurgists should provide the U.S. International Trade Administration (ITA) at the U.S. Department of Commerce with data on the prime cost composition of plate. After the investigation is completed, either ITC will impose a 77% surcharge on products of Severstal, MMK and NOSTA or Russian steel makers will start trading with the U.S. without quotas while the import duty will amount to 24% (it is 30% now). Anti-dumping measures are to be put in force against other integrated mills, which did not sign the agreement.
It is not the first agreement of this kind between Russia and the U.S. Russian exporters are quite interested in maintaining their participation in the American market, which they started actively developing more than 10 years ago. In the mid-1990s they were already shipping a wide range of products in significant volumes: slabs, bars, profiles, sections and plates, steel powders, ferroalloys, cast iron and ingot steel, rails and railroad clamps. The Russian steel was occupying an ever-growing portion of the U.S. market sector and, finally, it became "a thorn in the flesh" of American companies. Leaders of the U.S. steel industry joined labor unions in the fight against the new rival and induced the administration to initiate a series of anti-dumping procedures.
In 1997 both sides signed an agreement on "voluntary" export restrictions, which provided for Russia’s commitment to raise the price level and restrict export volumes. In October 1998 an anti-dumping investigation of Russian suppliers of hot-rolled steel was started. In February 1999 Russian and American representatives coordinated texts of two bilateral agreements on "voluntary" export limits.
One of these agreements dealt with suspending the anti-dumping investigation with respect to shipments of hot-rolled steel. It established five-year quotas for supplies of this product to the U.S. market, the upper limit of steel prices, the half-year moratorium on shipments of hot-rolled steel. The second one, the so-called "comprehensive steel agreement", provided for quotas not only for hot-rolled steel but also for all other metal products including semi-finished products. The 1997 shipment volumes were taken as the agreement’s basis.
As soon as this agreement expired on October 23, 2002 all anti-dumping investigations by the U.S. Department of Commerce were resumed.
By the working standards of ITC a full investigation takes 5 years and includes open hearings, study of foreign trade data and financial indexes of domestic steel makers as well as some other matters. Anti-dumping measures against shipments of plate from Russia were put in force on October 24, 2002. Thus, since the investigation is to go on till 2008, Russian exporters, in the meantime, might lose their market positions. And if this happened a year ago, events would have developed exactly this way. But now the situation is different. The U.S. recognized Russia as "a country with a market economy". As the U.S. secretary of commerce Donald Evans said, this decision "reflects enormous economic changes that have taken place in Russia in the last decade".

TO EUROPE THROUGH DANISH WINDOW The company Lipetsk Iron & Steel Works (NLMK), one of the Russian steel industry’s leaders, acquired Denmark’s metallurgical enterprise DanSteel A/S. As analysts point our, this deal is a brilliant strategic move permitting NLMK to sidestep the EU quotas. Rolling 700,000 tons of slabs at the Danish mill automatically increases the Russian export shipments of steel to Europe from 1.4 million tons to 2 and even more million tons. In the opinion of Gordon Mofat, the director of DanSteel A/S and a member of the Organization of European Steel Producers, the move provides the Russian company with a solid position in "the attractive European market of steel products". However, he believes that the capacities of the mill in Frederiksvaerk will be enough to make competition in this market more intense. The start-up of a hot-rolling mill at DanSteel A/S was attended by Danish officials, the Union of Danish Industrialists and other public figures. The rolling shop will make the so-called heavy plates, i.e. plates 12 to 100 mm thick and up to 3.2 m wide. These products are used mainly in shipbuilding and some other sectors of the machine-building industry. The first batch of 6,000 tons of semi-finished steel products arrived in Denmark on December 1. New batches of 3, 800 tons will be coming in every few days. The supply contract with DanSteel A/S provides for 90,000 tons altogether. The total production volume for 2003 is set at 480,000 tons.

What benefits does the market status give to Russian metallurgists? It should be admitted that its absence put additional obstacles in the way of Russian goods to American consumers. The whole number of special restrictions was based, in the first place, on the argument that Russian manufacturers of this or that product were enjoying privileges of unfair competition since they were being subsidized, either directly or indirectly, by the State. Meanwhile, in accordance with standards of international trade recognizing the need to protect national markets from dumping or subsidized imports, the State should not interfere with business competition. If a country functions in the non-market conditions and its industry gets support from the state budget, then, economic indexes of production are not to be taken into account. In this case artificial indexes of the so-called surrogate country are calculated using, for example, the price of labor power in Brazil, price of electric power in Turkey and work general expenses in Thailand. After that an artificial prime cost is calculated and often it is several times as high as the actual one. Actual indexes of a non-market country are not considered.
Russia had its own objections. In particular, it substantiated the necessity of partial compensations to steel makers by the country’s vast expanses and resulting higher cost of transportation as well as bleak climate conditions requiring additional power consumption. Besides, in many instances the technological lag of Russia’s metallurgy did not allow the manufacture of products of the same quality as those in the U.S., Japan or EU. As a result, the Russian rolled products should objectively have had lower prices although they were sold under the same codes. Nevertheless, Americans used it as one more reason to accuse Russia of dumping.
The official recognition that Russia has a market economy provides exporters with an opportunity to fully participate in anti-dumping investigations giving them a chance to prove the groundlessness of charges with indexes of their own companies.
It should be kept in mind that in Russia three companies, Severstal, MMK and NOSTA, account for 85% of hot-rolled steel. What is more, in 2003 Severstal covered 85% of the volume set by the U.S. quota on the Russian shipments of hot-rolled steel. In spite of the necessity to take a break, the company feels at ease. The period, within which Severstal will not ship hot-rolled steel to the U.S., is quite acceptable to this company. Exactly the same amount of time is required for submitting all necessary documents to the U.S. Department of Commerce and their consideration. An exporter submits data on expenses and prime cost of his products based on results for the first quarter of 2003. It takes about a month after the end of the quarter to get accounts prepared and, thus, they will be ready in May or June. In other words, metallurgists are sure that the anti-dumping investigation will not affect them.
The readiness of Russian steel makers to play by the common rules suited the U.S. Both sides initialed an agreement, under which the ban on shipments of hot-rolled steel to the U.S. from January 23 through September 30 would become a base of suspending the antidumping investigation. ITA made a decision to conduct a comprehensive analysis of possibilities to lift anti-dumping tariffs on import shipments of Russian hot-rolled steel.