[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
OUR NATION OF BUILDERS: THE STRENGTH OF STEEL
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HEARING
BEFORE THE
SUBCOMMITTEE ON COMMERCE, MANUFACTURING, AND TRADE
OF THE
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
__________
MARCH 21, 2013
__________
Serial No. 113-23
Printed for the use of the Committee on Energy and Commerce
energycommerce.house.gov
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COMMITTEE ON ENERGY AND COMMERCE
FRED UPTON, Michigan
Chairman
RALPH M. HALL, Texas HENRY A. WAXMAN, California
JOE BARTON, Texas Ranking Member
Chairman Emeritus JOHN D. DINGELL, Michigan
ED WHITFIELD, Kentucky Chairman Emeritus
JOHN SHIMKUS, Illinois EDWARD J. MARKEY, Massachusetts
JOSEPH R. PITTS, Pennsylvania FRANK PALLONE, Jr., New Jersey
GREG WALDEN, Oregon BOBBY L. RUSH, Illinois
LEE TERRY, Nebraska ANNA G. ESHOO, California
MIKE ROGERS, Michigan ELIOT L. ENGEL, New York
TIM MURPHY, Pennsylvania GENE GREEN, Texas
MICHAEL C. BURGESS, Texas DIANA DeGETTE, Colorado
MARSHA BLACKBURN, Tennessee LOIS CAPPS, California
Vice Chairman MICHAEL F. DOYLE, Pennsylvania
PHIL GINGREY, Georgia JANICE D. SCHAKOWSKY, Illinois
STEVE SCALISE, Louisiana JIM MATHESON, Utah
ROBERT E. LATTA, Ohio G.K. BUTTERFIELD, North Carolina
CATHY McMORRIS RODGERS, Washington JOHN BARROW, Georgia
GREGG HARPER, Mississippi DORIS O. MATSUI, California
LEONARD LANCE, New Jersey DONNA M. CHRISTENSEN, Virgin
BILL CASSIDY, Louisiana Islands
BRETT GUTHRIE, Kentucky KATHY CASTOR, Florida
PETE OLSON, Texas JOHN P. SARBANES, Maryland
DAVID B. McKINLEY, West Virginia JERRY McNERNEY, California
CORY GARDNER, Colorado BRUCE L. BRALEY, Iowa
MIKE POMPEO, Kansas PETER WELCH, Vermont
ADAM KINZINGER, Illinois BEN RAY LUJAN, New Mexico
H. MORGAN GRIFFITH, Virginia PAUL TONKO, New York
GUS M. BILIRAKIS, Florida
BILL JOHNSON, Missouri
BILLY LONG, Missouri
RENEE L. ELLMERS, North Carolina
Subcommittee on Commerce, Manufacturing, and Trade
LEE TERRY, Nebraska
Chairman
LEONARD LANCE, New Jersey JANICE D. SCHAKOWSKY, Illinois
Vice Chairman Ranking Member
MARSHA BLACKBURN, Tennessee G.K. BUTTERFIELD, North Carolina
GREGG HARPER, Mississippi JOHN P. SARBANES, Maryland
BRETT GUTHRIE, Kentucky JERRY McNERNEY, California
PETE OLSON, Texas PETER WELCH, Vermont
DAVE B. McKINLEY, West Virginia JOHN D. DINGELL, Michigan
MIKE POMPEO, Kansas BOBBY L. RUSH, Illinois
ADAM KINZINGER, Illinois JIM MATHESON, Utah
GUS M. BILIRAKIS, Florida JOHN BARROW, Georgia
BILL JOHNSON, Missouri DONNA M. CHRISTENSEN, Virgin
BILLY LONG, Missouri Islands
JOE BARTON, Texas HENRY A. WAXMAN, California, ex
FRED UPTON, Michigan, ex officio officio
C O N T E N T S
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Page
Hon. Lee Terry, a Representative in Congress from the State of
Nebraska, opening statement.................................... 1
Prepared statement........................................... 2
Hon. Leonard Lance, a Representative in Congress from the State
of New Jersey, opening statement............................... 3
Hon. Janice D. Schakowsky, a Representative in Congress from the
State of Illinois, opening statement........................... 3
Hon. Henry A. Waxman, a Representative in Congress from the State
of California, opening statement............................... 4
Hon. Tim Murphy, a Representative in Congress from the
Commonwealth of Pennsylvania, opening statement................ 6
Witnesses
Joe Carrabba, President and CEO, Cliffs Natural Resources........ 8
Prepared statement........................................... 11
Answers to submitted questions............................... 116
John Ferriola, President and CEO, Nucor Corporation.............. 17
Prepared statement........................................... 19
Answers to submitted questions............................... 122
Edward T. Kurasz, Executive Vice President, Allied Tube and
Conduit........................................................ 29
Prepared statement........................................... 31
Answers to submitted questions............................... 129
Richard J. Harshman, Chairman, President and CEO, Allegheny
Technologies, Inc.............................................. 46
Prepared statement........................................... 49
Answers to submitted questions............................... 131
Mike Rehwinkel, President and CEO, EVRAZ North America........... 59
Prepared statement........................................... 61
Answers to submitted questions............................... 133
John Surma, Chairman and CEO, United States Steel Corporation.... 65
Prepared statement........................................... 68
Answers to submitted questions............................... 136
Michael G. Rippey, President and CEO, ArcelorMittal USA.......... 75
Prepared statement........................................... 77
Answers to submitted questions............................... 138
Yvette Pena Lopes, Deputy Director, Bluegreen Alliance........... 84
Prepared statement........................................... 86
Answers to submitted questions............................... 141
OUR NATION OF BUILDERS: THE STRENGTH OF STEEL
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THURSDAY, MARCH 21, 2013
House of Representatives,
Subcommittee on Commerce, Manufacturing, and Trade,
Committee on Energy and Commerce,
Washington, DC.
The subcommittee met, pursuant to call, at 9:32 a.m., in
room 2123, Rayburn House Office Building, Hon. Lee Terry
(chairman of the subcommittee) presiding.
Present: Representatives Terry, Lance, Blackburn, Harper,
McKinley, Bilirakis, Schakowsky, Butterfield, Welch, Barrow,
Christensen, and Waxman (ex officio).
Staff Present: Charlotte Baker, Press Secretary; Kirby
Howard, Legislative Clerk; Nick Magallenes, Policy Coordinator,
CMT; Gib Mullen, Chief Counsel, CMT; Andrew Powaleny, Deputy
Press Secretary; Shannon Weinberg Taylor, Counsel, CMT;
Michelle Ash, Minority Chief Counsel; and Will Wallace,
Democratic Policy Analyst.
OPENING STATEMENT OF HON. LEE TERRY, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF NEBRASKA
Mr. Terry. Thank you all for being here. I am going to give
my opening statement. Thank you, Janice. And I want to thank
all for coming here to the second in a series of hearings of
the Commerce, Manufacturing, Trade Subcommittee, Promoting Our
Nation of Builders.
The focus of today's hearing is the health of our steel
industry and how we can work together to overcome the
challenges that face us. According to the American Iron and
Steel Institute, steel manufacturing employs 161,900
individuals over 100 facilities nationwide, and the steel
industry is indirectly responsible for over 1.1 million jobs in
industries like transportation, construction, auto and national
security.
The productivity of the steel industry is outstanding.
Since the late 1880s, U.S. steel plants have seen a five-fold
increase in productivity, producing 1 ton of finished steel in
10.2 man hours in the early 1980s to an average of just over 2
man hours in 2011. Today the U.S. is the third largest producer
of steel, producing over 86 million metric tons. And U.S. steel
manufacturers do this while maintaining a strong commitment to
workplace safety. And that is a testament to a very highly
skilled workforce.
But today's hearing is about finding pathways to policies
that will cut down regulatory and other barriers standing in
the way of our U.S. steel manufacturers. Two things I would
like to know are, first, what can we do to make sure our U.S.
steel producers can compete on a level playing field, not
handicapped by outdated trade laws and not pitted against
foreign companies that are unfairly subsidized; and, second,
what can we do to match workers with these good paying jobs. If
U.S. steel manufacturers cannot find the skilled workers they
need, that is a double tragedy.
Surplus steel from countries such as China and South Korea
is flooding our markets with cheap products. This low cost and
sometimes low quality steel being imported to the U.S. is being
heavily subsidized by exporting nations through state
sponsorship, export rebates, currency manipulation and other
schemes.
This subcommittee's jurisdiction covers nontariff trade
policies, of course, and this is of great interest to us, but
the main reason we are here today is to identify the obstacles
facing the industry so we can improve the competitive
environment of this vital industry.
At this time I would like to yield to Marsha Blackburn.
[The prepared statement of Mr. Terry follows:]
Prepared statement of Hon. Lee Terry
Thank you for all for coming to the second in a series of
hearings of the Commerce, Manufacturing and Trade Subcommittee
promoting our nation of builders.
The focus of today's hearing is the health of our steel
industry and how we can work together to overcome the
challenges it faces.
According to the American Iron and Steel Institute, steel
manufacturing employs 161,900 individuals at over 100
facilities nationwide. And, the steel industry is indirectly
responsible for over 1.1 million jobs in industries like
transportation, construction, auto, and national security.
The productivity of the steel industry is astounding.
Since the late 1980s, U.S. steel plants have seen a five-
fold increase in productivity, producing one ton of finished
steel in 10.2 man-hours in the early 1980s to an average of
just over two man-hours in 2011. Today, the U.S. is the third
largest producer of steel, producing over 86 million metric
tons.
And U.S. steel manufacturers do this while maintaining a
strong commitment to workplace safety. That's a testament to a
very highly skilled workforce.
But today's hearing is about finding pathways to policies
that will cut down regulatory and other barriers standing in
the way of steel manufacturers. Two things I'd like to know
are: first, what can we do to make sure our U.S. steel
producers can compete on a level playing field, not handicapped
by outdated trade laws and not pitted against foreign companies
that are unfairly subsidized? And, second, what can we do to
match workers with these good-paying jobs? If U.S. steel
manufacturers cannot find the skilled workers they need, that
is a double tragedy.
Surplus steel from countries such as China and Korea is
flooding our markets with cheap products. This low cost and
sometimes low quality steel being imported into the U.S. is
being heavily subsidized by exporting nations through state
sponsorship, export rebates, currency manipulation and other
schemes.
This subcommittee's jurisdiction covers non-tariff trade
polices, of course, and this is of great interest to us. But
the main reason we are here today is to identify the obstacles
facing the industry so we can improve the competitive
environment for this vital industry. We want to make sure our
steel manufacturers have the opportunity to compete on equal
terms. If we can help facilitate that and make sure the U.S.
government is not thwarting progress, then I am confident they
will flourish in a competitive market.
# # #
Mrs. Blackburn. I thank the gentleman for yielding. And I
thank our chairman for calling this hearing today. We all know
the vital nature of the steel industry to our economy. Here in
the country, we have got 161,000 workers who are working in the
steel economy. Some of those we find in Tennessee. Mr.
Ferriola, who is the CEO of Nucor Steel has two plants in
Tennessee, one down in Memphis, where I have visited and had
the opportunity to see firsthand the work they are doing; the
other is up in Portland. So we welcome you and we thank you for
the work you are doing.
I will add that in the 11 steel industry facilities that
are located in Tennessee, in the past couple of years, we have
seen 2,813 new jobs created, so we are pleased with that and
that type growth in this sector. So welcome. We appreciate
that. I yield back my time.
Mr. Terry. And at this time, I will recognize the vice
chairman of the committee, Mr. Lance.
OPENING STATEMENT OF HON. LEONARD LANCE, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF NEW JERSEY
Mr. Lance. Thank you, Mr. Chairman. And my thanks to both
panels and to Congressman Murphy as well as our distinguished
guests from the steel industry.
New Jersey has approximately 7,000 steel-supported jobs,
and many of these are value added, and one plant is affiliated
with Nucor Corporation, which is testifying today. Even though
the State is not a primary producer of steel, it is obviously a
critical industry for every corner of the country.
As we examine the vitality of manufacturing in the United
States, we are looking in part at the way government at the
Federal level can help or hurt the industry. In past
subcommittee hearings, we have been told that the current Tax
Code is a driver of inefficiency and frequently uncertainty.
Extending the R&D tax credit, simplifying the Tax Code and
lowering the Federal tax rates are suggestions that come to
mind. A high tax rate makes it all the more difficult for our
domestic steel industry to compete in an already difficult
playing field where competitors are frequently subsidized in
various ways by their home countries.
Beside the tax issue, I welcome your testimony on a range
of issues faced by our domestic steel industry, and I hope that
you will find our subcommittee a willing partner in ways to
encourage and support the manufacturing community and the steel
industry. Thank you very much, Mr. Chairman.
Mr. Terry. Well done, Mr. Vice-Chairman. At this time
recognize the ranking member of the subcommittee, Ms.
Schakowsky.
OPENING STATEMENT OF HON. JANICE D. SCHAKOWSKY, A
REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS
Ms. Schakowsky. Thank you, Mr. Chairman. As you said, this
is the second hearing of the year and the second in a series on
our series of manufacturing, a critical sector of our economy.
At the last hearing a small steel company from my district,
Black Steel, Joe Black was here to talk about the industry and
some of the challenges.
I want to welcome those from the Chicago area, Ed Kurasz
from Allied Tube and Conduit Corporation, Mike Rehwinkel from
air--I probably am destroying these names; I am sorry if I am--
EVRAZ, Inc., North America, and Mike Rippey, president and CEO
of Arcelor Mittal USA.
And so I grew up in Chicago and, of course, I know a lot
about old steel on the southeast side of Chicago and
northwestern Indiana. I am sorry that Pete Visclosky wasn't
able. He is managing a bill on the floor today, but I am
anxious to hear about new steel and what is going on right now.
I am focused very much on having an educated workforce that
can well serve your industry. Our universities and community
colleges and high schools are beginning to really have
collaborations with businesses to prepare students for long
success in manufacturing and a commitment to the national
infrastructure. Without that, the American steel industry will
suffer.
The American Society of Civil Engineers reported this week
that our national infrastructure is rated as a D plus. I know
that sounds bad. It is up from a D 4 years ago. While
investments in our Nation's infrastructure, including the
American Recovery and Reinvestment Act and a 27-month
transportation bill have improved our transportation
infrastructure, but a lot of work remains.
And as times have changed, steel production has been able
to become more energy efficient while simultaneously meeting
the shifting demands of our consumers. Today the effort to
develop cleaner energy sources is heavily reliant on steel.
Wind turbines are composed of almost 90 percent steel. Wind is
one of the fastest growing energy sources in America,
representing 35 percent of all newly installed capacity over
the past 5 months.
I know my colleagues have talked about the need for an
equal playing field, so our steel can compete competitively in
the world, and I hope we will talk about that as well.
And in the interest of time, because I know we are going to
have a vote before too very long and getting to our witnesses
is a top priority, let me yield back my time.
Mr. Terry. The chair recognizes Mr. Waxman.
OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
Mr. Waxman. Thank you very much, Mr. Chairman. I appreciate
your holding this hearing on steel manufacturing. And I want to
thank all the witnesses, including our colleague, Mr. Murphy,
for being here today.
The steel industry's important. In 2012, steelmakers in the
U.S. Produced 96 million tons of steel, the third most in the
world. The steel industry employs 160,000 workers directly, and
it supports many more jobs in related industries, like
construction, automotive assembly and the production of
machinery and equipment.
The success of the domestic steel industry is closely tied
to the health of the broad economy. When the country's economy
is growing, we need steel to build new structures, new cars and
new machines, but when the economy contracts, as it did after
the collapse of Wall Street in 2008, demand for steel plunges
and the U.S. steel industry suffers significant turmoil.
Today the steel industry's total output and capacity
utilization are approaching levels historically consistent with
stable industry-wide growth. After an unsteady 2012, some
industry observers believe that gains in residential
construction and the auto industry will make 2013 a good year
for steel.
To maximize growth in the long-term, however, we must take
several steps to support the U.S. steel industry and ensure it
remains globally competitive. First, we must seize the
opportunity to improve our Nation's infrastructure. Targeted
investments in transportation, water supply, public facilities
and our electric grid are needed, and in some cases, long
overdue.
According to the American Society of Civil Engineers, 12
percent of the bridges in my home State of California are
considered structurally deficient. These must be repaired, and
now is the perfect time, given how low interest rates are.
Improved road, rail and port infrastructure would lead to
efficiencies throughout the steel supply chain and demand for
steel would surge as projects got underway.
Second, we must prepare for an innovative future. This
means providing incentives for research and development so that
the U.S. steel industry can outcompete other nations. It also
means ensuring that workers have the education and technical
training they need to work in the highly automated steel mills
of the future.
Third, we must remain vigilant in the area of trade
enforcement. Countries whose steel producers seek to access the
U.S. market must keep their commitments under international
trade law not to distort the market in their favor. And we must
impose anti-dumping sanctions and countervailing duties when
warranted.
I understand that steel production is an energy intensive
process, and that some witnesses today may speak against
energy-related regulations, but we must remember that
innovations that make our factories less polluting and our air
and water cleaner are good for the environment, our communities
and the steel manufacturers.
Through the hard work of improving energy efficiency and
using cleaner energy, the U.S. steel industry has become more
competitive, allowing it to continue to grow and thrive. We
could have both: a clean environment and a vibrant steel
industry.
I look forward to the testimony today to learn more about
how we can accomplish these goals. And I thank you Mr.
Chairman. Yield back.
Mr. Terry. Thank you, Mr. Waxman. At this time it is my
pleasure to introduce our first panel, the chairs, chair and
co-chair of the steel caucus in the House. Before introducing
Mr. Murphy, I will also--his co-chair is on the floor. Mr.
Visclosky is running time on the CR, so he is not able to make
it today, but I am sure, Mr. Murphy, you can share his views.
And you will not get his 5 minutes, though.
We recognize the gentleman from Pennsylvania, a passionate
supporter of the steel industry, Mr. Murphy. You are recognized
for your 5 minutes.
OPENING STATEMENT OF HON. TIM MURPHY, A REPRESENTATIVE IN
CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA
Mr. Murphy. Thank you, Mr. Chairman. And I want to thank
also my good friend Pete Visclosky for his hard work and
dedication for this.
Together we lead the steel caucus, which is over 100
lawmakers from 30 States who work to keep steel strong. Usually
we do the steel caucus hearings with just our members alone,
but I appreciate the opportunity to speak to your subcommittee.
American steel supports 1.2 million jobs and adds $350
billion to our Nation's economy and serves as a backbone, both
literally and figuratively, of America's built environment, our
national defense and our economic strength. American
steelmaking stands ready for resurgence powered by plentiful
fuel resources, new technologies and the most efficient plants
in the world.
American steelmakers have tremendous advantages over their
foreign competitors, but they need clarity and certainty here
at home. New restrictions in the mining of coal and iron ore
will make it costly for integrated steelmakers to operate the
blast furnaces that produce coke and iron.
Now, if someone has not paid attention during high school
science, they may have missed this point: you cannot make steel
without coal and other raw materials, and you cannot make steel
in the United States without competitively-priced coal,
electricity and shipping and rail, trucks, barges, and a
competitive and well-trained workforce. And most importantly,
we cannot keep our mills open while other countries undermine
fair trade.
Meanwhile, our Nation's crumbling infrastructure makes it
increasingly difficult for steelmakers to transport goods
across the United States. But there is a solution. I have
introduced the Infrastructure, Jobs and Energy Independence
Act, H.R. 787, to put us on the path to energy independence
while creating jobs and fixing our aging roads, bridges, locks
and dams without raising taxes, importing OPEC oil or borrowing
from China.
This legislation expedites development of our offshore
resources, bringing an estimated $2.2 to $3.7 trillion in new
Federal revenue dedicated--and dedicating some of those new
funds to slashing our deficit and rebuilding America's
transportation infrastructure. It will launch a massive
building boom that will mean big things for the steel industry.
In its 2013 report card for America's infrastructure, the
American Society of Civil Engineers estimated that 25 percent
of the Nation's bridges are deficient. That is more than
151,000 structures in need of new steel.
Now, steelmakers also face challenges beyond our shores
from nations that consistently violate their obligations under
international trade agreements. Our steelmakers can win this
fight, but only if there are clear standards in place giving
them and the working men and women of this country a fair shot
at competing and succeeding.
In the March 12th issue of The Wall Street Journal, it
reported that Chinese officials are increasingly worried that
state-owned steelmakers are expanding capacity while losing
money. Faced with these contradictory conditions and sluggish
economy, Chinese steelmakers are dumping their excess product
into our markets in clear violation of our international trade
agreements.
In the last year, imports from China have grown 34 percent.
Across the industry, imports now account for a quarter of steel
consumption. And the brightest segment of the steel market, oil
country tubular goods, we are finding significant quantities of
Chinese-made steel that has been purposefully mislabeled in
order to avoid duties and detection by Customs officials.
American manufacturers like U.S. Steel's National Tube
plant in McKeesport, Pennsylvania, has been expanding to
provide drill and transmission pipe for gas and oil deposits
found in places like the Marcellus shale in my congressional
district, but now these facilities are scaling back because of
the massive influx of cheap government-subsidized foreign
steel.
Furthermore, steel from China, Japan, Korea, and several
other countries is coming in at a significant price discount
because their governments are engaged in illegal currency
manipulation.
Yesterday I introduced the Currency Reform for Fair Trade
Act, H.R. 1276, along with a group of bipartisan lawmakers, to
stop this practice. Foreign governments are illegally
controlling currency markets in order to prop up their steel
exporters, while our manufacturers suffer slowly and painfully.
And now that China knows they can get away with
manipulating currency, other nations like Japan and Korea are
doing the same. It is a growing list, and it will continue to
grow as long as other countries see a loophole big enough to
sail a cargo ship through.
This legislation will give the Department of Commerce and
Treasury the necessary tools to build honest and fair trade
regulations. America wouldn't tolerate this kind of behavior by
domestic companies, so why do we tolerate it by foreign powers?
Free trade doesn't have to be free for all where only the naive
abide by the rules. We want China and other countries to be
honest trading partners and we want them to know we are a
welcome source, but not a welcome mat.
Moving forward, our caucus will continue to pursue these
issues to ensure American steel remains strong and vibrant for
decades to come. And I thank you for this opportunity to appear
before you today. And I will welcome any questions.
Mr. Terry. Your testimony is appreciated.
We don't have time to ask you questions, though, because we
want to talk to the people behind you.
Mr. Murphy. I thank the------
Mr. Terry. I will just catch you on the floor.
Mr. Murphy. Thank you very much, Mr. Chairman.
Ms. Schakowsky. Yes. I------
Mr. Terry. Ms. Schakowsky.
Ms. Schakowsky. Thank you, Mr. Chairman. I have a unanimous
consent request to put the testimony of Congressman Pete
Visclosky into the record. \*\
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Mr. Terry. Absolutely. So without objection, so ordered. So
thank you, Mr. Murphy. Well done.
Mr. Murphy. Thank you all.
Mr. Terry. Your timing was great.
Mr. Murphy. Thank you.
Mr. Terry. At this time I would like to invite our panel
up. And, boy, I will tell you, this is probably one of the most
distinguished panels we can have, so this is impressive.
So I am just going to invite all of you up now. Joseph
Carrabba, chairman, president and CEO of the Cliffs Natural
Resources, currently chair of the American Iron and Steel
Institute; John Ferriola, CEO and president, Nucor Corporation,
currently chair of the Steel Manufacturers Association, and had
the extremely positive, once-in-a-lifetime experience of
spending 4 years in Norfolk, Nebraska, running the Nucor
facility there; Richard Harshman, chairman, president and CEO
of Allegheny Technologies, Inc., also represents the specialty
steel industry of North America; Edward Kurasz--Kurasz, I am
sorry--executive vice president, Allied Tube and Conduit,
currently chair of the Committee on Pipe and Tube Imports; Mr.
Mike Rehwinkel, president and CEO of EVRAZ North America; Mike
Rippey, president and CEO of Arcelor--I probably have that
wrong--ArcelorMittal USA; and John Surma, president and CEO of
United States Steel; and then Ms. Yvette Pena Lopes, deputy
director of the BlueGreen Alliance.
As you know, the rules, 5 minutes. There is a little
machine someplace that will let you know your time. Just
because we are going to have votes early in the day here, I
would appreciate it if you could stick to the 5 minutes as much
as you can. And Mr. Carrabba, I would appreciate it if you
would start us.
STATEMENTS OF JOE CARRABBA, PRESIDENT AND CEO, CLIFFS NATURAL
RESOURCES; JOHN FERRIOLA, PRESIDENT AND CEO, NUCOR CORPORATION;
RICHARD J. HARSHMAN, CHAIRMAN, PRESIDENT AND CEO, ALLEGHENY
TECHNOLOGIES, INC.; EDWARD T. KURASZ, EXECUTIVE VICE PRESIDENT,
ALLIED TUBE AND CONDUIT; MIKE REHWINKEL, PRESIDENT AND CEO,
EVRAZ NORTH AMERICA; MIKE RIPPEY, PRESIDENT AND CEO,
ARCELORMITTAL USA; JOHN SURMA, CHAIRMAN AND CEO, UNITED STATES
STEEL CORPORATION; AND YVETTE PENA LOPES, DEPUTY DIRECTOR,
BLUEGREEN ALLIANCE
STATEMENT OF JOE CARRABBA
Mr. Carrabba. Thank you, sir. Chairman------
Mr. Terry. And just turn on your mike and pull it up to
you.
Mr. Carrabba. There we go. Chairman Terry and Ranking
Member Schakowsky and distinguished members of the
subcommittee, good morning, and thank you for the opportunity
to testify today. My name is Joe Carrabba and I am the
chairman, president and CEO of Cliffs Natural Resources.
As the current chairman of the American Iron and Steel
Institute, I wish to express sincere appreciation of your
interest in the state of our domestic steel industry.
In many respects, our industry is at a crossroads. We are
an extremely efficient sector with a talented workforce, state-
of-the-art technologies, and the ability to furnish products
critical to the broader U.S. manufacturing economy; however, we
also face significant challenges arising from a persistently
sluggish economic recovery, the surge of unfairly traded steel
imports, and an investment climate plagued by overly
restrictive regulatory requirements and constant uncertainty in
the areas of U.S. tax and fiscal policy.
In a moment, I will speak further to specific policy
challenges and opportunities, but first I would like to briefly
highlight the economic contributions of this industry.
The company that I lead, Cliffs Natural Resources, is the
largest producer of iron ore in North America, and a
significant producer of metallurgical coal for steelmaking. As
a supplier to the domestic steel industry, Cliffs is a prime
example of how steel production in the United States provides
economic benefits well beyond those generated by steel
manufacturing alone.
In a study commissioned by the American Iron and Steel
Institute last year, Professor Timothy Considine of the
University of Wyoming found that each job in America's steel
industry supports seven jobs in the U.S. Economy. The aggregate
national impacts of steelmaking, however, does not come close
to capturing the importance of our industry to specific
communities and regions across the United States.
A study recently released by the University of Minnesota
Duluth found that iron ore mining contributes to more than $1.9
billion to Minnesota's economy and mining represents 30 percent
of the gross regional product of northeastern Minnesota.
Many of you have communities in your districts that share
such a profound reliance on the steel industry, its suppliers
and the family-sustaining jobs supported by these businesses.
Given the acute demand for more of these quality jobs, we are
grateful for your focus on our industry and we appreciate the
opportunity to share our perspective on public policy matters
that will help define the future of steelmaking in the United
States.
I would first like to address the importance of sensible
energy and environmental regulatory policy. While the CEOs
before you today represent different elements of a most diverse
industry, we all share reliance on cost-effective sources of
energy. Many believe that newly discovered shale gas
developments are the most remarkable source of economic growth
and prosperity that any of us are likely to encounter in our
lifetimes.
However, despite the tremendous promise of this new
domestic energy source, persistent permitting delays and an
arcane environmental regulatory environment threaten to further
degrade the status of the U.S. as the location of choice for
all large capital and energy-intensive industries.
Our permitting process is far too protracted, and we
increasingly find that Federal agencies are usurping the role
of States that States should play in working with industry to
innovate science-based solutions, working efficiently to reduce
environmental impacts.
In order for our industry to thrive, we need to responsibly
develop our American resources while ensuring that U.S.
regulatory requirements are as predictable and workable as they
are protective and stringent.
In addition to energy, our industry is also concerned with
the need for adequate Federal Government investment in
infrastructure. Just as iron ore mines and steel mills rely on
efficient rail, road and port infrastructure in our supply
chains, so too is prosperity of the U.S. economy linked to the
adequacy of our national infrastructure. Developing nations,
such as China, are recognizing the importance of
infrastructure, with massive investments in their
transportation networks. The United States can ill afford to
fall further behind in this space.
In 2013, Congress should begin developing options to ensure
a long-term funding mechanism for the Highway Trust Fund as
well as pursue reauthorization of the Water Resource
Development Act in order to rehabilitate or replace crumbling
infrastructure and enhance global competitiveness in
manufacturing.
Lastly, I would like to speak about the stake we all have
in our outcome of corporate tax reform. As a capital-intensive
industry facing intense competition in global markets, the
American steel industry supports tax policies that will make
U.S. firms more competitive globally.
In order for tax reform to produce real economic growth and
job creation, the Tax Code should not simply be changed to
favor less capital intensive sectors of the economy. Rather,
the framework for rate reduction must be determined based on
what it requires to ensure that all U.S. industries are more
globally competitive.
In short, achieving the lower overall statutory tax rate
should not come at the expense of a higher effective tax rate
for businesses and industries that most support capital
investment, job growth and value-added manufacturing.
As industry leaders, we stand ready and willing to work
with you on these and other priorities. Today's hearing is an
important and encouraging step forward in the realization of
the public policy environment that can allow our industry and
the economy as a whole to thrive. Once again, I thank you for
your time and the invitation to appear before you today.
Mr. Terry. Thank you very much.
[The prepared statement of Mr. Carrabba follows:]
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Mr. Terry. Mr. Ferriola.
STATEMENT OF JOHN FERRIOLA
Mr. Ferriola. Good morning. On behalf of our 22,000
teammates, I would like to thank you for this opportunity to
appear before you today. My name is John Ferriola. I am
president and CEO of Nucor Corporation. I am also chairman of
the Steel Manufacturing Association, and I serve on the board
of the American Iron and Steel Institute. Nucor is the largest
steel producer in the United States and also the largest
recycler.
Chairman Terry and members of the committee, I commend you
for convening these hearings on America's manufacturing sector.
Like you, we at Nucor believe a strong manufacturing base is
essential to sustainable economic growth. For years, our
company has emphasized the need for America to once again be a
Nation that makes, builds and innovates.
Despite the difficult economic conditions of the past 4
years, Nucor has continued to invest in our U.S.-based
facilities. Our capital investments since the industry's last
peak in 2008, through the end of 2012, totaled almost $7
billion. We are doing this in a down cycle to position
ourselves to be stronger and more profitable when the economy
recovers. This investment philosophy has driven tremendous
returns for our investments and contributes to our position of
strength.
Our largest project currently is the construction of a $750
million direct-reduced iron plant in Louisiana. Direct-reduced
iron is a key ore material we use in the steelmaking process,
along with scrap steel. The project is employing over 600
construction workers, and will create 150 full-time permanent
manufacturing jobs with the average annual wage of $70,000.
Bringing this technology back to the United States would
not have been possible without an abundant and affordable
supply of natural gas. That is why we at Nucor are urging
decision-makers to proceed with caution on the issue of LNG
exports. We feel strongly that we should not export away a
significant domestic competitive advantage.
We have also made investments that will allow us to make
products for higher end markets, including automotive, heavy
equipment and energy. For example, we are investing $290
million to expand our capacity to make special bar quality
steel at our mills in Norfolk, Nebraska; Darlington, South
Carolina, and Memphis, Tennessee.
We are investing another $115 million to expand production
of hot rolled sheet piling at our Nucor-Yamato mill in
Arkansas, and we recently completed a $110 million heat
treating facility at our Hertford, North Carolina, plate mill
that enables us to produce armored plate for military
applications and high end plate steel for the heavy machinery
sector.
I am particularly proud that we did not lay off a single
teammate during the great recession. Nucor has a long tradition
of growing stronger during downturns by investing in our
teammates and mills and collaborating with our customers;
however, a surge of steel imports that defies market
fundamentals puts our ability to reap the benefits of these
investments at risk.
Last year steel imports increased 17 percent from 2011 and
a whopping 38 percent from 2010, a 38 percent increase in
imports in 24 months, meanwhile, U.S. steel capacity
utilization was only 72 percent. Imports were up in every major
product area and for most major steel-producing nations.
These import levels make no sense whatsoever when you
consider the sluggish domestic economic recovery and the fact
that American producers are among the lowest cost steel
producers in the world. The U.S. enjoys marked advantages in
practically every aspect of steelmaking, including access to
capital, technology and raw materials, relatively low energy
costs, high labor productivity--we will put the American worker
up against any worker in the world--and proximity to the U.S.
market.
The reason we are seeing this import surge is that, while
America is a free market, many major steel-producing countries
are not. Foreign governments interfere in the market through
state-owned enterprises, import barriers, currency
manipulation, raw material export restrictions, and subsidies
that are in direct violation of international rules.
India recently imposed new tariffs on hot rolled coil and
steel plate. Egypt has import restrictions on rebar. Brazil not
only doubled its steel tariff, but is proposing export tax
increases on scrap metal in order to discourage its export. And
China, by far, is the worst offender. Its highly subsidized
steel industry is government-owned and government-controlled,
and its market remains heavily distorted and closed to outside
competition.
As a result of these trade barriers, the open U.S. market
becomes a dumping ground for steel products from all over the
world. This is where public policy becomes important. Global
trade is governed by a set of rules. If our system of trade is
going to work and be fair for all participants, we must use
every tool at our disposal to enforce these rules.
Mr. Terry. Mr. Ferriola, if you can just go to the
conclusion at this point.
Mr. Ferriola. We have a tremendous opportunity to
revitalize the American manufacturing sector and strengthen our
economy. If we have strong trade enforcement coupled with other
policy areas discussed here today, infrastructure investment,
regulatory certainty, domestic energy development, America can
once again become a Nation that makes, builds and innovates.
Thank you for your time this morning.
Mr. Terry. Thank you very much.
[The prepared statement of Mr. Ferriola follows:]
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Mr. Terry. Mr. Kurasz.
Before you start, we just got notice that the floor was
moving faster than we thought, and we probably are not going to
get all through, but we will come back, but we are going to
keep going until we absolutely have to go to the floor. Mr.
Kurasz.
STATEMENT OF EDWARD T. KURASZ
Mr. Kurasz. Good morning, Chairman Terry, Ranking Member
Schakowsky and------
Mr. Terry. Could you pull that a little closer?
Mr. Kurasz [continuing]. And distinguished members of the
Energy and Commerce Subcommittee on Commerce, Manufacture and
Trade. My name is Ed Kurasz. I am the executive vice president
of sales at Allied Tube and Conduit and the chairman on the
committee on pipe tube imports.
Allied Tube as five production facilities in the United
States and we employ nearly 1,000 workers at our headquarter
facility in Harvey, Illinois. We permanently closed a facility
in Morrisville, Pennsylvania, early last year, which I will
discuss shortly. The CPTI that I represent has 42 member
companies located in 30 States, with approximately 35,000
workers.
Like other segments of the industry, but probably worse,
the U.S. pipe and tube industry has a major import problem. In
2012, we had a record 8.75 million tons of imports. In fact,
imports increased by 1.7 million tons over 2011 and captures
virtually the entire increase in U.S. consumption of pipe and
tube in 2012. OCTG imports took more than half the market and
line pipe imports took more than two-thirds of the U.S. market.
Korea alone shipped 2 million tons, and numerous other
countries, including Vietnam, Turkey, India, Taiwan and many
middle eastern countries accounted for massive surges of
imports into the U.S. markets.
While seven successful sets of trade cases caused direct
imports of pipe and tube from China to fall from a record 3
million tons in 2008 to less than 200,000 tons last year, there
has been significant evasion of these orders through
transshipment and misclassification. For these reasons, we
support the efforts of Congressman Billy Long and others in the
House and Senate to pass the ENFORCE Act, which would provide
U.S. Customs and Border Protection with necessary tools to end
Customs fraud and duty evasion.
While direct imports from China have been curtailed, we
believe that as much as half of pipe tube imports entering the
United States are made with Chinese steel. According to the
OECD, China had approximately 970 million tons of steel
capacity and approximately 717 million tons of steel production
in 2012. China exported 60 million tons, to make it far and
away the world leader in steel exports.
The Chinese government subsidizes its steel industry for
policy reasons and makes Chinese steel available to our foreign
pipe and tube competitors at ridiculously low dumped and
subsidized prices.
We urge this committee to engage the administration in
discussions to use World Trade Organization rules to address
Chinese government subsidization of its steel industry.
In 2012, both the galvanized steel wire industry and our
circular welded pipe industry lost cases at the ITC, which
found that despite significant market share losses, modest
improvements in the industry as a result of increases in demand
after the depth of the recession was cause for negative injury
determinations.
We believe the Commission failed to take in account the
prescribed statutory obligation to analyze injury in the
context of the business cycle. In particular, despite the fact
that dumped and subsidized imports from India, Oman, UAE and
Vietnam doubled from 100,000 tons to 200,000 tons between 2009
and 2011, grabbing five additional points of market share in
the U.S. market, the ITC found operating profit margins of 2
percent with net losses of 2 percent to be a sign of a healthy
U.S. pipe industry.
I was quite mystified that commissioners at the hearing and
in their written decision did not understand the need for a
manufacturing industry to earn its cost of capital. In
addition, I was extremely troubled by the Commission's finding
that our permanent closure of a mill in Morrisville,
Pennsylvania, was not a sign of injury due to imports because
our mill equipment was purchased for spare parts.
There is something fundamentally wrong with our trade law
system when ITC commissioners do not understand the need for an
industry to earn a decent profit margin and don't understand
the devastating impact of mill closures on industries, their
workers and the surrounding communities.
As the two charts displayed demonstrate, the massive pipe
and tube import surge of 2012, which has continued in 2013, has
caused devastating reductions in U.S. production in 2013. We,
therefore, urge Congress to persuade President Obama to appoint
ITC commissioners that will vigorously enforce trade laws in
accordance with U.S. statutes. We also urge you to hold
oversight committee hearings to determine why the Commission is
not properly enforcing the injury laws, and to explore
legislative changes that will make the intent of these laws
even more explicit.
There is no doubt in my mind that without action against
massive subsidized Chinese overcapacity and without strong
trade law enforcement that our extremely competitive U.S. pipe
and tube industry will largely disappear within the next
decade. Since we are the second largest consumer of steel in
the United States, that will also have a major negative impact
on the American steel industry.
Thank you for the opportunity to appear here today. We urge
the committee to take all the necessary steps to ensure that
our industry can compete in a fair and free trade environment.
Thank you.
Mr. Terry. Thank you, Mr. Kurasz.
[The prepared statement of Mr. Kurasz follows:]
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Mr. Terry. Mr. Harshman.
STATEMENT OF RICHARD J. HARSHMAN
Mr. Harshman. Good morning. I am the chairman, president
and------
Mr. Terry. Is your mic on?
Mr. Harshman [continuing]. Chairman, president and chief
executive officer of Allegheny Technologies, Incorporated.
Thank you for inviting me to participate in this hearing. I am
appearing on behalf of the specialty steel industry of North
America, or SSINA, and my company. SSINA's member companies
produce stainless steels, super alloys, high-nickel materials,
electrical steel, tool steels, and other high technology
materials for critical application.
ATI is one of the largest and most diversified specialty
metals producers in the world, with 2012 sales of over $5
billion. We have over 11,000 full-time employees, 85 percent of
whom are located in the United States.
At ATI, we use innovative technologies to offer growing
global markets a wide range of specialty metal solutions. Our
products include titanium and titanium alloys, nickel-based
alloys and superalloys, zirconium, hafnium and niobium, advance
powder alloys, stainless steel and specialty alloys, grain-
oriented electrical steel, and highly engineered forgings and
castings.
Sales to many of our domestic customers allow them to
produce critical products, such as commercial and military
airplanes and jet engines, gas turbines, power transformers,
oil and gas drilling and completions equipment, products used
by global chemical processing industry, and advanced medical
equipment. We are one of the few companies in the world which
can produce a full lineup of specialty metals in such a wide
variety of critical applications.
We understand and believe that the ability to manufacture
critical specialty metals for our key growth markets must
remain a core competency of the United States both from a
national security and a sustainable economic growth
perspective.
First I would like to comment on the current state of the
specialty metals industry. As the U.S. economy slowly improved,
so did demand for our products. The outlook for 2013 is for
modest improvement; however, low priced imports continue to
take a substantial share of stainless steel market, and were up
12 percent in 2012, with China and Mexico leading the way.
I would also like to mention this is a significant year for
our industry, which is celebrating the 100th anniversary of the
creation of stainless steel. And we hope you can attend a
reception on April 15th, with an exhibit showing the history of
stainless steel.
The U.S. specialty metals industry is technologically
advanced and competitive in the global economy. ATI, for
example, exports about 26 percent of its U.S. production and
sells U.S.-made products all over the world. In recent years,
ATI has invested more than $3.7 billion in capital expenditures
and strategic acquisitions, nearly all in our facilities
located in the United States.
Our most recent strategic investment is the construction of
a state-of-the-art $1.2 billion ATI-funded hot rolling and
processing facility in Brackenridge, Pennsylvania, which is
currently scheduled for completion by the end of 2013.
Why has ATI chosen to make these investments in the United
States rather than in a foreign country? First, we are a proud
U.S. company; second, we believe that to ensure that we remain
a technology leader in specialty metals, we need to co-locate
our technology development resources with our core
manufacturing capabilities.
We believe the best way to achieve the vision is to have
the majority of our manufacturing capabilities in the U.S. so
that we can be an innovative, high quality, reliable and cost-
competitive supplier to our customers. However, as a primarily
U.S.-based manufacturer, we must be able to compete on a level
playing field with our foreign competitors, several of which
are state-owned enterprises.
A level playing field combined with our industry-leading
innovation and advanced technology capabilities, our
unsurpassed manufacturing capabilities, and the productivity
and knowledge of our employees will ensure ATI remains a key
contributor to the national security and the economic growth of
the United States.
We are optimistic about our ability to continue to grow and
invest here in the U.S., however, I would like to raise several
policy concerns which may affect our long-term competitiveness.
ATI remains supportive of the Department of Energy's
preliminary ruling regarding more stringent efficiency
standards for distribution transformers. The proposed standards
issued after a lengthy negotiated rule-making process
established a well-balanced update to the existing standards.
The proposal will result in a significant and additional energy
savings, it is environmentally responsible and it maintains the
domestic manufacturing base for core materials. We urge the
Department of Energy to finalize the preliminary ruling
expeditiously and without further change.
It is critical that the U.S. retain strong trade laws to
allow us to fight pervasive unfair trade practices of our
foreign competitors: dumping, government subsidies, protected
markets, state-owned enterprises. U.S. companies struggle to
compete with government-owned and supported foreign companies,
which have easy or low access to capital or may not be required
to make the same returns on investment required of the
publicly-traded U.S. company.
Of particular concern, the government of China continues to
subsidize its specialty metals producers by keeping currency
valuations low.
Here at home, we are concerned about a new targeted dumping
methodology proposed by Commerce and USTR, which will severely
weaken our anti-dumping laws. Additionally, we are concerned
about the potential use of foreign trade zones to subvert
existing tariffs.
ATI is proud to produce materials critical to the national
defense. No weapon, naval or aerospace program could function
without specialty metals. Congress recognized this more than 40
years ago with the specialty metals amendment, and we encourage
Congress to continue to support that. Thank you again for the
opportunity to testify, and I would be happy to answer any
questions.
Mr. Terry. Thank you.
[The prepared statement of Mr. Harshman follows:]
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Mr. Terry. We have 6 minutes before we have to go to the
floor and make our votes, so we are going to have one last
witness. Mr. Surma, Mr. Rippey and Ms. Pena Lopes, we will wait
till we get back. We will probably gavel and go. You are
invited to our anteroom, which actually has coffee.
Mr. Rehwinkel.
STATEMENT OF MIKE REHWINKEL
Mr. Rehwinkel. Mr. Chairman and members of the committee, I
am Mike Rehwinkel, president and CEO of EVRAZ North America. My
company makes flat, long and tubular steel for a variety of
industries, including the energy sector, infrastructure like
rail, bridges and roads, building construction, and we are very
proud of the armor plate we developed for the U.S. military. We
employ 4,500 people in the United States and Canada. Roughly
half of the employees work in our Pueblo, Colorado, Portland,
Oregon, and Claymont, Delaware, operations. In the last 56
years, we have made more than 20,000 miles of pipe.
Thank you for the opportunity to discuss the future of
steel manufacturing in this country. Today I want to join my
colleagues in painting a picture of what our industry needs to
support the nearly 154,000 well-paying jobs we currently
provide for American steel workers and to create new jobs for
the future.
Modern steel mills are highly technical operations, they
require bills of dollars in capital investments, demand a
highly skilled labor force. After touring the EVRAZ Colorado
mill, U.S. Senator Michael Bennett said, ``I have got it. These
are the middle class jobs we are talking about in Washington
and this is a place that creates them.''
Steel companies in America are very responsible corporate
citizens, strong stewards of the environment. In fact, EVRAZ is
a largest recycler in Colorado and Delaware. We make new steel
products from scrap metal.
Mr. Chairman, to be competitive in today's market, we need
a reasonable and streamlined regulatory approval process for
the construction and permitting of new facilities or
modernization of existing ones. If we are going to create and
maintain the jobs this country needs right now, the process
should meet the letter and spirit of the law. The process
should be timely and provide a high degree of certainty that
once the requirements are met, the project will be able to
proceed. It should be a proceeding that recognizes the scope of
the project being considered.
Currently, navigating the bureaucratic permitting process
is extremely frustrating in terms of the time, scope and
uncertainty. It has become controlled by special interests that
raise issues outside the purview of the process simply to delay
an approval.
To continue to have a healthy industry, regulations should
be well defined and we need to have a good working relationship
with regulators to obtain the most efficient results. A case in
point: the proposed Keystone XL Pipeline. This project includes
550 miles of my pipe. It will provide a competitively priced,
reliable North American supply option for Gulf Coast refinery.
Its completion is important for several compelling public
policy reasons. Pipelines are safe, efficient form of
transportation for liquids and gases. The required regulations
regarding Keystone construction, operation and safety have been
met, yet ongoing delays, reviews and questions, alternative
routing have delayed this particular project. These delays are
undermining the goal of secure, stable energy supplies in our
country.
Permitting reviews should continue to be fact-based and
focused on individual projects. Additional studies with
secondary implication of production activities like refineries
or supplementary pipeline should be evaluated independently of
the appropriate government agencies.
Approval time frames must be reasonable. Keystone was
approved by the Department of State and 11 cooperating
agencies. It has been exceptionally comprehensive. There was
rigorous environmental review and ample opportunity for public
input and participation.
In summary, the needs of the Nation and special interests
were both considered, the Keystone Pipeline met all regulatory
hurdles, and it should be allowed to proceed without further
delay.
Finally, I would like to point out that it is North
American products that meet the high quality standards for
steel products in general and this pipeline in particular. The
economic boost the energy renaissance will provide in terms of
the increased production and jobs should be benefits enjoyed by
north Americans, not foreign countries flooding us with
subsidized and unfairly traded imports that may be of inferior
quality.
We in the steel industry will gladly meet or exceed all
regulatory requirements, but we need our government's support
to ensure that once these requirements are met, we can get our
U.S. steelworkers back to making the products we need to
rebuild and repair our Nation's infrastructure and get our
natural resources to market. Thank you for your time.
Mr. Terry. Perfectly done. I appreciate that.
[The prepared statement of Mr. Rehwinkel follows:]
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Mr. Terry. Members, we have a minute three, but 288 of us
have yet to vote. We will see you in a little bit.
[Recess.]
Mr. Terry. We have gotten word that Jan is on her way, but
we can go ahead and start.
So, Mr. Surma, you are up.
STATEMENT OF JOHN SURMA
Mr. Surma. Thank you very much, Chairman Terry and members
of the subcommittee.
I would like to start by thanking you for devoting an
entire hearing to the state of our steel industry. We have long
recognized that our industry has a true champion in your
distinguished colleague, Steel Caucus Chairman Murphy, who was
just with us, and we appreciate the efforts he puts forth on
the policy and political front to advance our steel industry's
interests. Your willingness to hold today's hearing speaks
volumes about Mr. Murphy's enthusiasm and persistence in
promoting an industry that is important to the country,
especially to his district, where I live, and his State, where
we are headquartered, and we employ nearly 6,000 people.
Steel is a globalized industry that competes fiercely on
costs and quality to win and keep markets. Too often some of
our biggest challenges come from counterproductive and costly
government policy and regulation. The Energy and Commerce
Committee knows these problems well, and we appreciate your
efforts to conduct vigorous oversight of U.S. EPA regulations
and guidance, and to attempt to achieve a better cost-benefit
analysis of individual rulemakings, as well as a cumulative
cost of regulatory compliance.
I will spend my brief time this morning talking about
America's natural gas success story and how it is affecting the
steel industry and our company.
Just a few short years ago, few could grasp the economic,
social, and environmental potential that would be unleashed by
the discovery and technological mastery of bringing America's
shale resources to market in the form of oil and natural gas.
Today, however, we read U.S. Government reports projecting that
the United States will be the largest energy producer in the
world by 2020.
As a result of this new supply source and our ability to
extract it safely and economically, there is a renaissance
under way in the manufacturing sector. It is propelled by the
availability and competitive pricing of natural gas. Electric
utilities; industrial users, including refiners, chemicals,
steel, and the transportation sector; and households are all
turning to natural gas as a clean and cost-effective energy
source.
United States Steel Corporation has been manufacturing
high-quality steel products for more than 100 years. Since
1901, our products have included pipes and tubes for energy
industry customers, and today we are the largest supplier of
these products in North America.
As the energy industry has increased its domestic
exploration and production efforts, new markets have emerged
for steel tubular products and services. The energy sector has
been a rare bright spot for us during a challenging period of
economic recession and painfully slow growth in the rest of the
economy.
We built and invested in a new joint venture in northern
California to produce large-diameter spiral-welded pipe to
serve pipeline and distribution customers. We are designing new
grades of steel and new products, such as our PATRIOT and USS
LIBERTY premium connections to serve the exacting requirements
of shale drilling and production. We are adding new
capabilities at our operating facilities to serve our
customers' growing and changing needs, including a new $100
million finishing facility in Lorain, Ohio, began operations in
late 2011, created 100 new full-time jobs, and the
refurbishment and reopening of McKeesport Tubular operations
just south of Pittsburgh.
U.S. Steel is also one of the country's largest natural gas
consumers. In fact, we consume all forms of energy, including
natural gas, coal, coke, electricity, and biomass. To give you
an idea of our natural gas use, in 2012, U.S. Steel used more
than 130 million MMBTUs of natural gas across our North
American facilities. So ever $1 change on the NYMEX is over
$100 million impact on our bottom line on an annual basis.
The current competitive price situation has been very
positive for our steel-producing activities, where we use 6
MMBTUs per ton of steel shipped. Here in the U.S. Those 6
MMBTUs cost us around $25. In Europe, where we also operate,
those same 6 MMBTUs cost us close to $75. Twenty-five dollars
here, 75 in Europe. That is called being competitive, and that
is reality.
We are as concerned as anybody about prices and volatility,
but we also have great confidence in the ability of our
domestic share reserves and the energy industry to meet
America's natural gas requirements if they are permitted to do
so.
Competitively priced natural gas has enabled us to enhance
our industrial processes and technologies, while improving our
environmental performance along the way. As you know, natural
gas emissions contain about half the greenhouse gases present
in coal emissions. So every ton of coal we can replace with
natural gas helps us to reduce our total emissions.
One example is increased injection of natural gas to our
blast furnaces in order to reduce our usage rates for coke,
which we derive from coal, an important material in our iron-
making process. We now have the ability to the optimize the
blend of fuels to attain the lowest carbon cost for each
particular furnace as well as to make adjustments to maintain
that cost based on the changing relationship between coke,
injection coal, and natural gas.
Let me close my remarks with a couple of comments
concerning the recent surge in imported steel products
generally, which my distinguished colleagues have discussed,
but specifically on pipe and tube imports.
In 2010, the U.S. Imported almost 2.3 million tons of oil
country casing and tubular goods used in exploration in
developments of oil and natural gas. Last year the U.S.
Imported over 3.4 million net tons of these high-tech, high-
value-added products, an increase of more than 51 percent over
a 2-year period.
Some foreign production have been even more aggressive.
Since 2010, casing and tubing imports from South Korea are up
more than 58 percent, imports from Taiwan are up more than 88
percent, and imports from Saudi Arabia are up more than 420
percent. Same story is true for many other pipe products.
Even though the last year featured a relatively strong
market for OCTG, public pricing sources estimate that U.S.
Prices of casing and tubing fell by as much as $200 per net
ton. Very disconcerting following large capital investments to
serve the sector by our company and others.
Let me just conclude by saying that the shale gas
revolution holds great promise for American industry and
workers. We believe the import surge problem calls for strong
responses from all who believe that true market-based
competition is the best pathway to prosperity. The time has
come for a strong global consensus that winners and losers in
the steel business should be determined by hard work,
innovation, costs and competition, not by market-distorting
government programs.
Mr. Terry. Thank you very much.
[The prepared statement of Mr. Surma follows:]
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Mr. Terry. Mr. Murphy wanted you to have more time to say
nice things about him, but he wasn't here to hear your
beginning, so I am going to have to deny that request.
Mr. Rippey.
STATEMENT OF MICHAEL G. RIPPEY
Mr. Rippey. Mr. Chairman and members of the subcommittee, I
am Mike Rippey, president and CEO of ArcelorMittal USA. On
behalf of my company and its 20,000 U.S. Employees, I want to
thank you for holding these hearings on the future of American
manufacturing.
If I can leave you with only one thought today, it is this:
The American steel industry represented by those at this table
is simply not your grandfather's or even your father's steel
industry. The industry represented here operates at the cutting
edge of material science. It produces high-technology solutions
for its customers. It does so with increasingly advanced and, I
might add, expensive equipment operated by a highly skilled and
tech-savvy workforce. Its employees are better paid than almost
any industrial workers in the world. In short, it provides
great jobs for American workers and for our country.
You have my full testimony, so I won't address all the
issues raised in it, but there are two that I would like to
highlight now, and I am happy to answer questions on the
others.
First, let me address how we are supporting our auto
customers. ArcelorMittal is the number one worldwide supplier
of automotive steels. One out of every five cars in the world
is made of ArcelorMittal steel. So you can understand that we
work hard every day to meet the ever-changing needs of our auto
customers.
Since the early 1900s, steel has been the standard material
for car body construction. It is strong, moldable, and low
cost. But customer expectations and government regulations such
as CAFE have challenged automakers to increase safety, improve
fuel economy, and reduce CO2 emissions all at the
same time. A huge challenge. I am here today to tell you that
the steel is meeting the challenge.
When the Transportation Department and EPA first announced
the goal of bringing the fleet to a Corporate Average Fuel
Economy of 54 \1/2\ miles per gallon by 2025, there were those
who proclaimed that this was simply game over for steel. We
knew otherwise. So to demonstrate this, we obtained from EPA
and NHTSA the very computer models used to assess fuel
technology and set standards. These models show that weight
reduction we can achieve with advanced steels combined with
power train improvements can indeed get 54 \1/2\ miles per
gallon. The models also show that steel gets the fleet 54 \1/2\
miles per gallon at a lower cost than other materials.
We understand that part of the objective of this standard
is to reduce greenhouse gas emissions. We urge the subcommittee
to make sure that CAFE regulations measure the full impact of
materials on the environment, from cradle to grave, or over the
life cycle. Models show that steel gets the fleet 54 \1/2\
miles per gallon with a lower total life cycle carbon footprint
than other materials that are significantly more energy and
emissions intensive.
We can achieve these incredible technological advances in
automotive and many of our other product applications because
of the innovation of our workforce, the hard-fought relative
prosperity of the domestic steel industry, and our R&D
initiatives. But that prosperity is threatened every day. That
is why we need your help to transform America's vital
manufacturing base and to ensure a secure job future for our
workers.
One of our highest priorities must be to identify,
encourage, and train manufacturing workers in the future. In
the next few years, because of retirements, we face having
hundreds of job openings left unfilled either because of
today's young people have forgotten about manufacturing, or
because they lack the skills and work values we need.
To address this shortage ArcelorMittal initiated
Steelworker for the Future in 2008, an associate degree program
in partnership with great community colleges located near our
plants. We work with local high schools to attract science- and
math-savvy students to this program, where they get classroom
training at a reasonable cost. Then we offer them paid
internships at our plants. Qualified graduates are offered
full-time jobs when they finish this program. If they don't
want to work for us, they still end up with a set of skills for
a lifetime, these skills that will allow them to be valued by
other manufacturing companies.
I would urge the committee to look closely at private
programs like Steelworker for the Future as a possible template
for a national campaign to educate young people about the
incredible possibilities that today's manufacturing industries
offer. With thousands of great jobs going begging every year in
manufacturing, it is time we made a national priority to value
and train people who make things.
Mr. Chairman, once again, thank you for the opportunity to
testify, and I look forward to your questions.
Mr. Terry. Thank you.
[The prepared statement of Mr. Rippey follows:]
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Mr. Terry. Now Ms. Pena Lopes. Appreciate your being here.
STATEMENT OF YVETTE PENA LOPES
Ms. Pena Lopes. Thank you. Good morning.
Chairman Terry, Ranking Member Schakowsky, and members of
the subcommittee, I am Yvette Pena Lopes, deputy director of
the BlueGreen Alliance. On behalf of my organization, our 14
national labor and environmental partners, and the estimated 15
million members and supporters they represent, I want to thank
you for holding this hearing today. We appreciate the
invitation to testify and are honored to join the other
panelists from the Congressional Steel Caucus and the steel
industry; in particular, the CEOs of ArcelorMittal, Allegheny
Technologies, and EVRAZ, who are each valued members of the
BlueGreen Alliance's Corporate Advisory Council.
United Steelworkers and the Sierra Club founded the
BlueGreen Alliance in 2006 and have since grown to incorporate
12 other labor and environmental organizations to create an
alliance built with a wide variety of priorities and
backgrounds. Our partners have come together to move America
towards a 21st century clean economy, and manufacturing has
consistently been a major focus of the alliance.
The economic downturn and years of shifting manufacturing
production took a significant toll on U.S. Manufacturing and
their workers. America has begun to change this, but much more
needs to be done to bring these jobs back and ensure that
American manufacturing, and the steel industry in particular,
are drivers of America's 21st century clean economy.
To achieve this rebirth, we must implement the following
five drivers of American manufacturing. First, we must rebuild
our Nation's infrastructure. Investment in our infrastructure
can yield tremendous benefits, including jobs and expanded
demand in our domestic steel sector. One out of every four of
the Nation's bridges are structurally deficient or functionally
obsolete. Nearly a quarter of the Nation's bus and rail
infrastructure is in marginal or poor condition. Across the
country 700,000 tons of steel plate is used annually in bridge
and building construction projects. If a properly structured
infrastructure program is implemented, job creation for the
manufacturing sector could clear more than 250,000 new jobs.
Second, we must deploy more industrial energy efficiency.
Energy efficiency leverages productivity and power from
resources that in many cases would otherwise literally vanish
into thin air. When combined with smart policies aimed at
minimizing the economic impact to power providers, efficiency
gains can be a win for manufacturers, utilities, workers,
consumers, and the environment.
Third, you must integrate more advanced transportation and
clean energy into our economy. Whether it is more efficient
technology in advanced materials for automobiles, commercial
scale wind turbines, or rail lines, steel is a necessary
component for these industries that will drive the 21st
century.
Last year the Obama administration set forth the strongest
clean car standards in a generation, making conventional
technology significantly more efficient and using advanced
materials to make our cars stronger yet lighter, which will
make the biggest contributions towards getting the American
vehicle fleet to 54.5 miles per gallon over the next 12 years.
Over the next decade, an estimated $2.3 trillion will be
invested in clean technologies; however, according to Ernst &
Young, the U.S. Renewable energy investment climate is losing
attractiveness, while countries like China and Germany are
gaining ground. Existing policy support for clean energy does
not provide adequate long-term certainty for the industry to
succeed. We must implement long-term policy certainty.
Fourth, we must ensure products and components are made in
America. Buy America policies reflect where the jobs are, not
where the manufacturing companies are headquartered or
incorporated. This approach ensures that taxpayer dollars are
reinvested in jobs in communities here at home.
Fifth, we must continue to support research and
development. Manufacturing is responsible for 70 percent of all
private-sector research and development spending and 90 percent
of all American patents.
The Department of Energy's Advanced Manufacturing Office
recently launched the Innovative Manufacturing Initiative. One
of the projects selected was a partnership between DOE,
ArcelorMittal, U.S. Steel, and others to produce flash
ironmaking technology, which is a cleaner, coke-free way to
produce iron from abundant domestic iron ore concentrates and
natural gas with a 30 to 50 percent improved energy
productivity. We must continue to support R&D such as this as
well as the work being done at the Department of Commerce.
Mr. Chairman, Ranking Member Schakowsky, and fellow members
of the subcommittee, we truly believe that these five measures
will go a long way toward helping America and its workers
reinvigorate the steel sector, U.S. Manufacturing, and the
middle class, and move America to a clean economy while
ensuring that we continue to address climate change.
Once again, thank you for the opportunity to testify today.
Mr. Terry. Thank you very much.
[The prepared statement of Ms. Pena Lopes follows:]
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Mr. Terry. And thank you to all of our folks here on the
panel. Very well done.
This now starts our question period. We get to ask you
questions, and you get to answer. And it is not under oath, but
we still expect you to be honest and truthful with us. That is
right. You had to agree to that and sign that. That is right.
So most of the discussions really boil down to a few areas
that there seems to be consensus among you, and that is the
trade policies, energy policies. And then amongst the energy
policy is being cleaner, more efficient. And then I should add
workforce. So I am going to focus my first round of questions
on energy, and probably to Mr. Surma and Mr. Ferriola. I'll
start with you, Mr. Ferriola.
What is your current worry about energy--what is the one
thing in that general field that worries you the most or
concerns you the most?
Mr. Ferriola. Well, we believe that the best way to get
sustainable growth in the economy is through job creation. We
need to create more jobs here at home. To do that, we need a
reasonably low-priced, affordable, and available energy source.
Natural gas is a great answer to that need.
Our concern is that we will export that competitive
advantage away. We are not saying that you cannot export
natural gas. We believe that you need to show concern about
both the producer and the user of that natural gas, focus on
restoring our manufacturing base here in America first, and at
that time, if we have excess gas, then we should export it.
Mr. Terry. Mr. Surma.
Mr. Surma. As I mentioned in my remarks, Mr. Chairman, our
company is very large user of natural gas, and we are also the
largest pipe producer and providing pipe and other services to
natural gas producers. So inside our company we have the same
tension that may be felt across your committee. We believe that
a middle-of-the-road approach, cautious approach, to natural
gas, LNG exports would be appropriate, as my distinguished
colleague just mentioned.
We have to keep a close eye on the supply side. I think it
would be important, and we would very much be in favor of a
policy, administration Federal policy, that encourages
continued development of domestic energy sources, natural gas
liquids, and oil, and with pipeline transportation, because it
is safer and better, as my colleague said, but also uses a lot
of steel. A policy which says no exports we think is really
outside of what WTO would want anyway. A policy which says
unbridled exports are fine I think causes us supply worries. So
we think a process that is cautious, that allows the market to
give us some information as these large projects would come on
stream, and balances the supply/demand so that large users like
us aren't at risk.
The supply side needs to be encouraged by Federal policy
that should encourage very high environmental standards. We
should make no compromise on that. But I think it can be done
safely in an environmentally sustainable way while still
providing enormous economic benefits, employment, balance of
trade among other things, to domestic industry. So a favorable
energy policy that encourages domestic development and a
cautious approach to exports.
Mr. Terry. Anyone want to add to that testimony? Anyone?
All right. In regard to natural gas sustainability,
availability, reliability, affordability, do any of you worry
about EPA regulations or potential regulations?
Mr. Surma.
Mr. Surma. I maybe was not as explicit as I should be. We
think regulations that would be designed to impede the
continued safe and economically sustainable development of
domestic natural gas would be a terrible idea. We think the
domestic natural gas production process has been demonstrated
to be safe. They should be held to very high standards.
But if one wonders why domestic natural gas is such a
success story in the U.S., this is the only place that there
are rocks with gas in them. OK? Argentina, Poland, Wales,
China, everywhere. The reason it is successful here is because
we have an entrepreneurial culture, capital markets that allow
capital to flow to a good use like that, open access pipelines,
and a market. And we think that that process of entrepreneurial
spirit should be allowed to continue with very high standards.
No problem with that, and I think the good companies know how
to do that.
But we think that the supply side of this is extremely
critical if, in fact, the other benefits are intended to flow.
We use 130 million MMBTUs of gas per year, and I don't want to
have to worry about where it is going to come from, and I would
rather not see it at $10 an M, which is what it was not too
long ago.
Mr. Terry. Yes. I remember that time.
Anyone else want to add on to that?
Mr. Ferriola.
Mr. Ferriola. I think my colleague said it very well.
Mr. Terry. All right. Then I will recognize the gentlelady
from Chicago, the ranking chairman, Ms. Schakowsky.
Ms. Schakowsky. Thank you, Mr. Chairman.
I wanted to ask Ms. Pena Lopes, I wanted to begin with
this. I feel that the greatest challenge facing humankind on
Earth today is if we--is climate change, and that it can
disrupt nations and their stability and create massive
disruptions. Obviously your coalition has brought together what
some see as disparate partners, and I am just wondering how
those--how you have resolved those kinds of issues in your
coalition.
Ms. Pena Lopes. Thank you for your question, Ranking Member
Schakowsky.
So all of our partners are committed to addressing the
issue of climate change. Everybody cares and wants a cleaner,
more safer Earth, I guess you can call it. And also everybody
embraces the potential opportunities that come from addressing
climate change as well.
From our perspective, whether in the past when we supported
comprehensive climate change, or even now as we are working
through the issues of the various EPA regulations on greenhouse
gases that are potentially before us, we really just--we see
this as, again, not just an opportunity to combat climate
change, but a real opportunity to create jobs and make our
industries and companies more efficient.
On the issues that we don't--I am sorry. On the issues that
we--there are differences, and there are quite a few, we really
provide a safe table to understand each other's perspectives,
but then do not take a position on them in the end if that is
where we land.
Mr. Schakowsky. Your written testimony cited a 2009
McKinsey & Company study that stated that the U.S. Can reduce
primary energy consumption by 21 percent by 2020, saving the
U.S. $47 billion a year, just by unlocking potential for energy
efficiency in the industrial sector. So I am wondering if you
could elaborate a bit.
Ms. Pena Lopes. Sure.
Mr. Schakowsky. And then any of the others that would want
to contribute to that.
Ms. Pena Lopes. Great. Thank you for your question.
We see a lot of opportunity in industrial efficiency. As
you know, the Obama administration several months ago put
forward an Executive Order with respect to industrial
efficiency and to work towards that. There is also legislation
that is about to be introduced.
But we have seen great examples like with ArcelorMittal.
There was a Department of Energy ARRA grant of--actually, it
was a matching grant for $31 million that really led to great,
great savings where they were actually able to generate and
regenerate their energy. This, of course, means, again,
cleaner, more efficient industry and also------
Mr. Schakowsky. If I could just--I wonder if Mr. Rippey
would want to comment on that.
Ms. Pena Lopes. Yes.
Mr. Rippey. The project that Ms. Lopes refers to is our
number 7 blast furnace in East Chicago, Indiana. It is the
largest blast furnace in North America. Prior to receiving
applying for and receiving that grant, the total amount of the
project was $63 million, we were simply flaring the waste gas
from that furnace. We were able, in the presence of the grant
and installing this equipment, to capture 100 percent of that
waste gas and convert it to electricity, which, of course, can
be used to supply homes and every industrial application for
electricity that we can imagine. So it is a wonderful example
of how industry can continue and should improve its use of
energy resource in this country.
I might add that since 1990, the domestic steel industry
has reduced its use of CO2 by nearly 30 percent and
its greenhouse gas emissions by 33 percent. So I think we have
a track record in this area of success, and we should continue
to challenge ourselves in this area.
Mr. Schakowsky. And is it true that it saves your company
nearly $20 million?
Mr. Rippey. Yes, it did.
Ms. Schakowsky. A year?
Mr. Rippey. Per year, yes, that is correct.
Ms. Schakowsky. Pretty impressive.
Mr. Rippey. Win-win project all the way around, as people
define win-win.
Ms. Schakowsky. Excellent.
Did you want to say something, Mr. Surma? I didn't know if
you wanted to add anything.
Mr. Surma. Just briefly. In our company's case, as I
mentioned, we are using natural gas now to inject into our
blast furnaces, thereby reducing the amount of coal-based coke
that we have to use by significant amounts that financially
probably save us on the order of $100 million a year. But the
emissions reductions on that are also significant, and we are
doing that because it is in our best business interests to do
so, and it is entirely consistent with the kind of emissions
reductions you would like to see.
One of the reasons that our industry has the lowest per-
unit carbon emissions per ton in the world is because we are
also the most recycled material of all time.
Ms. Schakowsky. Do you mean the U.S. Steel industry?
Mr. Surma. Yes.
Ms. Schakowsky. You are comparing------
Mr. Surma. Versus the rest of the world.
In the U.S., if we have roughly 100 million tons of
production, two-thirds of that is from recycled material, scrap
metal. It is the highest recycling rate of all time, more than
aluminum, glass, plastic times four. The best recycling system
of all time because economics drives it. And that is one of the
reasons we are reusing the energy and the labor and the
materials over and over again.
Almost all the steel that has ever been produced since the
1890s is still in use today. It doesn't go to a landfill, it
goes back in the system. So it is a wonderful system that
allows us to enjoy economics and emissions levels which are far
superior to most of the rest world.
Ms. Schakowsky. Thank you so much. I am going to have to
yield back.
Mr. Terry. Thank you.
Mr. McKinley, you are--I am sorry, Mr. Lance is recognized
for 5 minutes.
Mr. Lance. Thank you, Mr. Chairman. I will be brief.
To Mr. Harshman, in your testimony you state that your
industry continues to see substantial evidence of unfair trade
practices, such as dumping and foreign governmental subsidies
to the specialty steel sector. Might you be able to describe
with some specificity what these practices are, and who are the
worst offenders, and what trade enforcement options do you
believe are at your disposal?
Mr. Harshman. Sure. Thank you.
First of all, across all of our alloy systems, we are very
diversified starting with stainless steel and getting into the
much higher, more technological, higher barrier to entry of
titanium and nickel alloys. But that competition is coming, and
it is coming from the same places. We see the more commoditized
products------
Mr. Lance. Coming from Asia?
Mr. Harshman. Coming from China, it is coming from Korea,
it comes from Russia in terms of titanium. Eventually, longer
term, 10, 15 years down the road, it will come from places like
India.
Mr. Lance. And the titanium is found where?
Mr. Harshman. Titanium as an element is the seventh most
common element in the Earth's crust. And it starts either with
ore or rutile, and from that is produced titanium sponge, which
is a raw material that we then melt and alloy and produce into
the kind of products that make rotating components in a jet
engine.
On the dumping side, really where we see it in our business
today is more on the more commoditized business of stainless
steel. And we can go back and where the U.S., in 2012--where
the U.S. Economy began to weaken after a reasonable recovery in
the first quarter from a very challenging 2011, we saw--at the
same time as our demand started to decrease, we saw significant
or some weakening in the Chinese market from a production
standpoint.
And we can track when the imports from China began in March
and April, really the surge of imports into the U.S. Market in
that same time period where the Chinese economy started to
weaken, significant dumping of product in the U.S. at very low
prices, so that today there isn't--looking at just stainless
steel, there isn't a stainless company in the world that is
profitable. And that has to do with capacity, a large part of
the capacity------
Mr. Lance. What should we do about that?
Mr. Harshman. Well, part of what--we are not going to
control what happens in the Chinese market, but we can, as a
Nation, make them live up to their commitments that they made
when they were admitted to the WTO, and, in addition, look at
the manipulation of currency, which has to be viewed as a
significant market distorter.
Mr. Lance. We certainly urged the administration to do
that. Is there anything we can do in our responsibilities as
the legislative branch?
Mr. Harshman. Keep pushing it. I know there was a bill
introduced yesterday that continues to focus on the Chinese as
a currency manipulator; not just China, but other nations of
the world as well. And we are at a trade war. We are in a trade
war today. And it is represented by all of the companies
sitting at this table, and longer term, as you get into the
more advanced alloys and alloy systems, the capabilities and
the technologies that this country has today the Chinese aspire
to, the Indians aspire to, and longer term the Vietnamese
aspire to.
Mr. Lance. Thank you.
Do the other members of the panel agree with what Mr.
Harshman has said?
Unanimity, let the record show. So rare here in Congress.
Thank you, Mr. Chairman. I yield back the balance of my
time.
Mr. Terry. Thank you.
At this time we recognize the kind gentleman from North
Carolina Mr. Butterfield for his questions.
Mr. Butterfield. Thank you very much, Mr. Chairman. I
apologize for being late to you, but you know the routine that
we keep around here. I left the floor a few minutes ago after
we passed that continuing resolution. It is going to keep the
government open now until September 30th. At least we have that
behind us. Now I am preparing to get in my automobile and drive
4 hours to my district. So I apologize for being late.
But, Mr. Chairman, I thank you for holding today's hearing
on the American steel industry. And I just want to say publicly
that plate steel is a very important part of my congressional
district, and Nucor has a very robust facility there in my
district. And while they are providing good steel for the
world, they are also providing good jobs for the people that I
represent. And so steel is so very important to me.
It is clear from today's testimony that we can do more to
support domestic steel production. The U.S. Is the third
largest producer of steel in the entire world, but we rank
number 12 in exports. We must develop and support policies that
disincentivize foreign steel producers from circumventing
existing antidumping and countervailing duty orders.
And so the gentleman from Nucor Mr. Ferriola, I appreciate
you and all of our other witnesses for being here today. You
are the president and CEO of Nucor. And, as I said in my
opening statement, Nucor is a very large steel producer in my
district. Nucor has a tremendous presence in the district and
is a great success story for eastern North Carolina in domestic
steel production. At their Hertford County facility alone,
Nucor's 458 employees produce an astounding 1.6 million tons of
steel plates every year. And I have been there, and I have seen
it on many occasions, and it is really something to behold.
Nucor recently completed a $110 million heat-treating
facility that now enables them to manufacture steel armor
plates for the military, having a direct impact on the safety
and security of our forces.
As you may know, I have toured the facility and have gotten
to know your team very well. They are hard working and
dedicated. And on behalf of Hertford County and all of us in
the district, we are happy to have them.
And so, to the witnesses, I will direct this question to, I
guess, Mr. Ferriola. I highlighted the $110 million capital
development project in one of my counties. When so many
businesses are downsizing, layingoff employees, or, even worse,
closing entirely, what motivated you and your company to make
such a large capital investment in a rural community?
And I might also tell my friends that my district is the
fourth poorest district in the United States of American.
People don't realize that, but we are right at the bottom. And
what motivated you to make this investment?
Mr. Ferriola. Fate and confidence in our team, our workers,
and, frankly, in the American worker. We believe that if we are
allowed to have a level playing field, American industry, the
American worker, the Nucor teammate will compete very
successfully on the world market.
So we are not afraid to make these type of investments. We
do ask for your help in making sure we get that level playing
field so that we have the opportunity to earn the types of
return on those investments that we need to continue to provide
long-term, sustainable, high-paying jobs for Americans.
Mr. Butterfield. And it makes you competitive with anyone
in the world; is that right?
Mr. Ferriola. We believe that we are more than competitive
with anyone in the world.
Mr. Butterfield. Thank you. Thank you so very much.
I yield back, Mr. Chairman.
Mr. Terry. Thank you, Mr. Butterfield.
At this time, Mr. McKinley.
Mr. McKinley. Thank you, Mr. Chairman. I have got probably
20 minutes of questions to try to get in to 5, so I don't think
we are going to be able to get through all.
But I come from an area that has been markedly affected by
the demise of the steel industry, the northern panhandle of
West Virginia. We used to have 30,000 steelworkers in those
communities. So you look at that as 90,000, maybe 90,000
citizens, that were affected, that have lost their jobs. So I
am very frustrated with it.
We are not Philadelphia or New York or Chicago or St.
Louis. This is America, these little towns that are being
affected with it. And we were told over the years--I am going
back just in the 1980s that we had 30,000. We were told that it
was the dumping and currency manipulation was much of the fault
of the demise of the steel in our valley.
I applaud ArcelorMittal for holding on to the tin mill in
Weirton, but you drive through that town, see the rest of it
all boarded up, it just takes your breath away to think of all
the hundreds of thousands of people that are hurting as a
result of this loss.
So my question in part is why--what are you hearing why
they--the administration won't cite China as a currency
manipulator? Does anyone know why they won't do that? If
everyone keeps saying it is currency manipulation, but yet the
administration won't cite them.
Mr. Harshman. Yes, I--quite frankly, this has been going on
for a long time.
Mr. McKinley. Could you speak up just a little bit, please?
Mr. Harshman. This has been going on for a long time. This
is not just within the last 4 or 5 years. So from--this is a
national problem, right? This isn't a political issue. But I do
think that------
Mr. McKinley. What------
Mr. Harshman. Well, the best answer, the only answer I keep
hearing, is, well, they're--we can't get into a trade war with
the Chinese. That will start a trade war. And in actuality----
--
Mr. McKinley. So we can just expect to have more Weirtons,
Martins Ferry, Bel Air just dry up?
Mr. Harshman. Well, sir, I can't answer that from the
standpoint of the administration or the Congress, but I can
tell you from the standpoint of a CEO of a large manufacturing
company that operates in 18 States in the United States, many
of whom are represented on this panel, that this is a war. This
is a trade war. And we can't stand behind the view that we
can't--that we don't want to upset------
Mr. McKinley. Would we be adding to this trade war if we
tried to level the playing field------
Mr. Harshman. I don't believe so.
Mr. McKinley. Let me finish. If we were to level the
playing field by requiring as part of the determination for
fair trade or fairness to have our competing nations have the
same air and water qualities that we have here in America?
Mr. Harshman. I think that is part of the level of the
playing field.
Mr. McKinley. What would happen to American production if
we caused that to happen, that nations would have to meet our
standards so that it is a level playing field?
I am a fellow of the American Society of Civil Engineers,
so I am well aware of all the bridges and repairs that have to
be done. I am very concerned that we are going to continue to
lose our position. So I--what happens then?
Mr. Harshman. I think what happens is that you have a
stronger U.S. Economy that is growing and providing jobs. That
is what happens.
Mr. McKinley. How about, I assume the rest of you would
agree with that, that that really would have a dramatic impact?
I don't know how realistic it is, but I sure think it ought to
be a shot fired across someone's bow.
Yes, U.S. Steel?
Mr. Surma. If I could add, Mr. McKinley, last week--the
American Iron and Steel Institute always releases our industry
utilization statistics.Last week our industry ran at about 73
or -4 percent. Last week China set an all-time record
production. So in our country, if we need 120 million tons of
steel, we are only producing about 90-some million tons of
that. The rest is coming from places that don't live here.
As a young auditor, Mr. McKinley, my first client was
Wheeling-Pittsburgh Steel. I have been to Benwood, Beach
Bottom, Follansbee, Martins Ferry. I have been there. It is
tragic. And if we were running at 85 or 90 percent, those folks
would be at work today.
Mr. McKinley. Let me just close in the time frame I have. I
don't know whether any of you are aware that there is a
potential trade barrier or conflict we are having with Canada
right now that steel pipe--there is a--in the province of
Ontario, the regional council appeal has banned the use of
steel pipe in a $500 million water project. Are any of you
aware of that, that they are banning steel pipe? They are
replacing it with concrete.
And what I want to make sure is that we stop this trade
problem early before it becomes contagious and other people
pick up on that issue. So any of you could look into that, I
would love to hear back from you.
Mr. Terry. Thank you, Mr. McKinley.
Now Mr. Guthrie from Kentucky.
Mr. Guthrie. Thank you, Mr. Chairman. Appreciate you having
this hearing because this is important.
My family is in manufacturing. My dad worked for Ford in an
aluminum-casting facility, and now have one that we run--after
that plant closed, we had one of those--well, it is no longer
there, but a place you drive and say, wow, there were a lot of
good, hard-working people who made their living there. And it
was just a tough, tough decision Ford had to make. And they had
to make it to stay in business back in the early 1980s.
My question really, well, first of all, gets to--we are
talking about the environment on the green initiatives. We are
supplier to the automotive business before I came here, so I
have been in countless manufacturing facilities. And I am sure
everybody up here, because I know the quality of your
organizations, have your environmental policy, your--how you
deal with your community, how you deal with your neighbors. And
maybe it is different than it was before I was going around,
but everybody--you--even if you wanted to, which you don't, you
couldn't get away with not being a good neighbor anymore.
So the industries you are talking about--I think Al Gore
said one time, ``Pollution is really inefficiency.'' But you
can't run everything 100 percent efficient, but everything you
get down to that is reasonable is just benefiting your
business. Isn't that what you guys are figuring out to do to be
more profitable? And being good stewards of the environment.
And to the point, you may see me sometime around here, if I
see an aluminum can in a trash can, I will usually reach in and
get it out, because if it goes into a landfill, it does nothing
for us; if it goes back in the stream of commerce, it makes my
product cheaper because we buy scrap to form into--so corporate
America and manufacturing America are concerned about the
environment and have done great strides.
And I went to school on the Hudson River, so I know there
are issues there that you can't ignore that things have
happened in the past, but we are moving forward and working
together, and I appreciate that.
But there is a concern, I think it was in Mr. Harshman's
testimony, written testimony, about the EPA mercury source
control requirements. And I think you said that would
effectively preclude the construction of any new facilities in
the U.S. Could you clarify that? Because we are struggling with
that in our area as well.
Mr. Harshman. Yes, well, from some of the regulations that
are being discussed, as it pertains particularly to the
specialty metals industry, and more specifically to nickel
alloys, the EPA is discussing the--significantly lowering the
standards for the measurement of mercury, which would be at a
level that technology doesn't even enable you to measure. And
when you look at the amount of mercury that is a part of the
process from a specialty metals industry standpoint, it is
negligible. It is at levels that is not contributing to any
environmental concern from a scientific fact data standpoint.
And the introduction of levels of--that are below the
ability of companies to measure is not, in our view and in the
industry's view, the responsible approach to how can we produce
and have a viable economy with a safe and responsible
environmental compliance.
And I think that the businesses in this country--and you
are right, we have learned the lesson over the past 40 and 50
years, and the amount of investments that have gone on in the
metals and steel-related industries over the past 30 and 40
years, all of which have to be funded by profits and profitable
growth, every investment in the $1.1 billion investment we are
making today in our new hot rolling and processing facility in
Brackenridge, Pennsylvania, is state-of-the-art control systems
with state-of-the-art environmental systems, and advances the
state beyond our 60-year-old mill.
Mr. Guthrie. We have that in our area. We have a coal-fired
plant that supports aluminum smelter. The aluminum smelter uses
as much electricity as the city of Louisville. And these
maximal achievement standards--it is not measurable. This
electric company has got to decide are we going to invest this
kind of money to serve one client, and if--and so there is--
these are United Steelworker jobs that pay the kind of wages
you are talking about, and this is real. I mean, these are real
jobs you can point to that are as risk.
I am going to yield the rest of my time to Mr. McKinley.
Mr. McKinley. Thank you.
I have one last question with that, and that has to do with
the International Trade Commission. When they--when they make a
determination that someone is guilty of dumping, it is my
understanding that that money then, the duties collected, are
transferred to the Treasury.
Why don't they go to the companies that are affected and
convert--and by virtue of that extension to the men and women
that have worked in the steel mills that have lost their jobs
as a result of it? Do any of you--can any of you respond to
that in 11 seconds that we have left?
Mr. Ferriola. I can do it in just a few seconds. We agree.
At least I agree.
Mr. Terry. Do everybody agree with Mr. Ferriola's comment?
All right. Mr. Murphy from Pennsylvania, you are recognized
for your 5 minutes.
Mr. Murphy. Thank you.
Ms. Lopes, quick question. Isn't it true that the BlueGreen
Alliance and your members have opposed the Keystone pipeline?
Yes or no?
Ms. Pena Lopes. We have some members------
Mr. Murphy. Yes or no. I believe it is yes.
And isn't it a true------
Ms. Pena Lopes. We have a position.
Mr. Murphy. Is it true or not?
Ms. Pena Lopes. We have no position on Keystone pipeline.
We have some members who are in support of Keystone and others
who are against it.
Mr. Murphy. And isn't it true that some of your members
have been opposed to coal use, coal mining, coal exports, and
coal-fired power plants?
Ms. Pena Lopes. Some of our environmental partners, yes.
Mr. Murphy. I will take that as a yes.
Do you have a buy American policy for BlueGreen Alliance?
Ms. Pena Lopes. Yes.
Mr. Murphy. OK. Are you going to be in support of our
Currency Reform and Fair Trade Act, 1276, that is going to deal
with Chinese and other countries' currency manipulation?
Ms. Pena Lopes. I will be happy to look at it.
Mr. Murphy. OK. Thank you.
Mr. Surma, sorry I wasn't here to hear your positive
comments, but thank you.
You have made a lot of investments in domestic tubular
production in recent years. How did those investments relate to
the import situation?
Mr. Surma. As I mentioned in my comments, Congressman
Murphy, we invested, among other things, $100 million in a new
plant in Lorain, Ohio, just west of Cleveland, because our
customers said they were concerned about the availability of
certain types of casing for down-hole applications and some of
the higher-end alloys and finishing that we could provide; $100
million, 100 new people. And we are working there today.
That will stay invested for another 25 or 30 years, and
that was on the assumption in good faith that there would be a
level playing field for all of us. Since then, as I mentioned
in my testimony, Korean exports up a huge percentage; Vietnam
from zero to 240 percent; Saudi Arabia, 400 percent. That is
taking away our markets, and we have had to lay a few crews
off. Most of them are back now, fortunately.
But when we make investments, we expect to get a return, we
expect a level playing field. What we don't expect is to have
to have those 100 people compete with governments. And we think
that is totally unfair, and we encourage you and you
colleagues, and I know you do this, to be vigilant in
maintaining our trade laws and strident in ensuring their
strong enforcement.
Mr. Murphy. Thank you.
Now, the Steel Caucus has also led efforts to convince the
International Trade Commission of antidumping and
countervailing duties and positions, et cetera. I wonder if you
could say, are you convinced that the ITC is slow to respond or
unconvinced there has been an injury to domestic steelmakers?
Mr. Surma. From our company's standpoint, yes, we think the
system is terribly organized and terribly slow to respond. We
operate in other regions. Almost every other region in the
world--EU, Brazil, Russia, Canada, anywhere else--they are
mostly administrative actions that are taken realtime when
injury takes place. In our case, we have to prove either injury
or threat of injury, which the ITC has, to their convenience,
largely defined as a near-death condition.
And so several years ago when we had a trade case against
Chinese OCTG imports, we had 10,000 people on layoff, and
almost every plant in North America negligent was closed. They
found that to be injury, and even that was a close call. My
distinguished colleague here reports about a plant that was
closed and was found not to be injury. That kind of logic
escapes us.
And we think the system is such that the injury has to be
so severe and so prolonged that it almost makes it too late
when relief is actually provided. We would like to see a more
accelerated process where injury can be determined earlier so
we don't have to go to a near-death experience in order to
receive relief.
Mr. Murphy. Or death.
Mr. Harshman, I thank you also for being here. I want to
ask a question about titanium, which is a critical element for
jet planes, steel armor plate, et cetera, and that is why it is
considered a specialty metal.
My understanding is the Commerce Department is considering
a change in the foreign trade zones which would undermine
domestic titanium manufacturing. And one of the conditions of a
trade zone is you can't unfairly import foreign goods to resell
in America if there is an existing industry or provider here.
Can you comment about what would happen if the Foreign
Trade Zone Board reversed precedent and allowed foreign-made
titanium to be sold into the American commerce?
Mr. Harshman. Well, currently the big non-U.S. Producers of
titanium alloys, which are critical for not only commercial
aerospace, but also for military applications, are VSMPO, which
is a large Russian and essentially a state-owned enterprise in
Russia; the Japanese; and emerging--an emerging competitive
threat is in China.
And if the--the nature of the titanium industry in the U.S.
Is really dependent upon the diversification of the markets. It
is not only--the military spending could not support and
sustain a titanium industry in the U.S., even though it is
critical to the defense of the United States. So you need a
viable commercial base, commercial aerospace, an industrial
market. Titanium is used extensively in desal plants throughout
the world, for example, in chemical processing plants. And all
of that works together to make a viable U.S. industry of which
there is really only three producers today in the U.S.
And what the--the change in some of the foreign trade zone
laws that would permit the circumvention of the existing
dumping duties that are on titanium being imported from those
foreign locations into the U.S., if that were allowed to
happen, we believe it would significantly weaken and dampen the
profitability and the ability for the U.S. Titanium industry to
grow.
Mr. Murphy. And, Mr. Chairman, thank you again for holding
this hearing, and to the ranking member as well, on behalf of
the million-plus people in this country who are affected by
steel manufacturing jobs. It is critically important, and it is
a wise choice on your part to hold this hearing, for you and
Ms. Schakowsky. Thank you.
Mr. Terry. Thank you. Would you say that again?
That does conclude our question part. And, boy, I will tell
you just what an honor to have the high level of steel industry
here in this room today and participating in this. You have
been very helpful. And we understand that steel is a
foundational piece to our manufacturing in the United States,
and we want to be helpful.
So with that, let us see. I have unanimous--well, I guess I
will do the unanimous next.
Thank you. Oh, yes. Also, we all have additional questions
that we will not be able to give today, but we will submit
those to you in writing. We will ask you to respond as promptly
as you can. And remember the Members that are still left here,
that they have 10 working days to submit their questions.
And I ask unanimous consent to include in the record a
statement of C. Davis Nelson on behalf of the Cold Finished
Steel Bar Institute. It has been reviewed by the minority staff
as well. So I ask unanimous consent. Not hearing any objection,
so ordered. It will be submitted and accepted. \*\
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Mr. Terry. And at this point we are finished. So thank you
very much.
[Whereupon, at 11:54 a.m., the subcommittee was adjourned.]
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