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Commerce imposes higher penalties on S. Korean drilling pipe; impact questioned

| Friday, July 11, 2014, 4:39 p.m.

The Department of Commerce on Friday imposed penalties on South Korean imports of pipe into the United States, an action sought by the steel industry and its supporters who said thousands of jobs were at stake.

The agency's final decision reversed a preliminary finding in February — sharply criticized by the industry — which did not levy any anti-dumping duties on South Korean producers. The earlier ruling said Korean prices weren't below what steel was sold for in the American market.

The final penalties on so-called oil country tubular goods range from 9.89 percent on Nexteel Co. Ltd. to 15.75 percent on Hyundai Hysco, South Korea's two largest producers, and a 12.82 percent margin on other producers.

South Korea is the biggest importer of pipe among nine nations targeted in a trade case filed last year by U.S. Steel Corp. and eight others.

U.S. Steel “is pleased with the Department of Commerce's final decision finding significant unfair trade margins against the vast majority of subject imports, including South Korea,” CEO Mario Longhi said in a statement. “U.S. Steel has suffered mightily — orders have been reduced, mills have been idled and jobs have been lost.”

The Pittsburgh-based steelmaker's stock jumped on the news, rising 3.2 percent to $27.64, up 86 cents. The company has blamed competition from cheap imports for a decision to idle money-losing plants in McKeesport and Bellville, Texas, that make line pipe for the drilling industry.

The decision on Friday will not change the closings, said spokeswoman Courtney Boone. The plants will be closed indefinitely in early August, affecting 260 workers, including 180 in McKeesport.

U.S. Steel is working to cut costs after five years of annual losses. The company's Carnegie Way initiative so far has achieved $290 million in annual savings with cost cuts and undisclosed layoffs.

The Korean government is “deeply disappointed by the determination, which disrupts the current level playing field with inflated dumping margins,” said Youngjae Kim, an official at the Korean embassy in Washington.

John Tumazos of Tumazos Very Independent Research of Holmdel, N.J., said the decision likely won't change South Korea's behavior.

“I don't think that's a big deal because some of these products sell for $1,500 a ton and have large profit margins. A $150-per-ton duty clips them but there's still significant profit,” Tumazos said. “I don't expect a 10-15 percent duty to change their behavior; it could actually embolden them because it's so small.”

“Dumping duties of at least 30 percent would be needed to chase them away, and 50 percent would be better,” Tumazos said.

The next step in the process happens on Tuesday, when the International Trade Commission will hold a hearing on the case. The six-member independent federal agency makes final rulings on investigations conducted by the Commerce Department. The ITC is expected to take a final vote in mid-August.

Steel industry figures show that imports surged nearly 110 percent since 2008 from those countries. Total steel imports are at record levels — 28 percent of the United States market in May — and are largely to blame for one of the industry's worst crises in a decade.

An estimated 4,184 workers in eight states lost their jobs to the import surge since the beginning of 2012. And nearly 1,000 steel jobs were lost in the first three months of 2014, said a recent study by the Economic Policy Institute, a Washington think tank.

U.S. steelmakers were anticipating big benefits from supplying pipes for the booming drilling industry in Pennsylvania and other states. But those gains were being neutralized by cheaper imports that have depressed prices. Victory for steelmakers could mean higher costs for drillers. Pipe imports rose from 840,313 tons in 2010 to 1.76 million tons in 2013, according to the American Iron and Steel Institute, the industry's trade association, which claimed the nations dumped products in the United States at below cost. South Korea alone shipped 894,300 tons in 2013.

The latest decision has been highly anticipated by the industry and its supporters. They have held rallies and have lobbied Congress and the administration for action. Lawmakers sent letters to Secretary of Commerce Penny Prizker and Trade Ambassador Michael Froman.

“Today's announcement by the Commerce Department sends a long-overdue signal to foreign countries that trade crimes will not be tolerated, but it's a bittersweet ruling for the hard-working Southwestern Pennsylvania families who've already lost their jobs due to illegal dumping by South Korean steelmakers,” said Steel Caucus Chairman Tim Murphy, R-Upper St. Clair.

Petitioners included TMK IPSCO, which has two plants in Beaver County; Vallourec Star, with a tubing plant in Youngstown, Ohio; Boomberang Tube; Energex Tube, a unit of JMC Steel; Maverick Tube Corp.; Northwest Pipe Co.; Tejas Products; and Welded Tube USA Inc.

John D. Oravecz is a staff writer for Trib Total Media. He can be reached at 412-320-7882 or joravecz@tribweb.com.

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