FOR IMMEDIATE RELEASE:

Date: October 22, 2001

(Washington, DC) (October 22, 2001) -- The International Trade Commission (ITC) today ended the injury phase of the biggest international trade investigation in history with a finding that imports of certain stainless steel and alloy tool steel products are seriously injuring the domestic industry. The investigation, ordered by President Bush on June 5, was conducted under Section 201 of the 1974 Trade Act. Section 201 allows the President to restrict imports or impose stiff tariffs if the ITC finds in the affirmative.

The specialty steel products covered include stainless steel bar, rod and wire, stainless steel cut-to-length plate, and alloy tool steel. All but stainless steel cut-to-length plate received affirmative votes from the commissioners.

H.L. Kephart, Chairman of the Specialty Steel Industry of North America (SSINA), expressed gratitude to the President, ITC commissioners, and the Members of Congress who appeared before the ITC in support of the industry and its employees. "Although pleased with the ITC's findings in general, " said Kephart, "the industry is very disappointed in the negative vote on stainless steel cut plate and will consider filing antidumping cases on this product. We had been in the midst of preparing antidumping cases on cut plate when the section 201 case was initiated by the President." Antidumping cases require proof of "material"injury, a lower standard than the "serious" injury standard required for section 201 cases.

Kephart continued, "Although long overdue, the prospect of import relief is welcome news to the U.S. producers of specialty steel and their workers.. Below-cost pricing and import surges by foreign producers reacting to overcapacity issues and weak economies in their home countries have been the norm for years. Combine this with excessive foreign government subsidization, and you have a playing field so tilted that U.S. producers have found it impossible to realize adequate returns."

The ITC investigation focused on the five year period between 1996 and 2000. The industry contended that during that time U.S. specialty steel producers were forced to battle an import volume crisis that greatly reduced U.S. market share, depressed prices, and prevented producers from maintaining any semblance of the level of profitability necessary to function as a capital intensive, high technology industry.

In his testimony before the commissioners, Kephart stated that during the five-year period of investigation imports of stainless cut-to-length plate increased 127%; stainless bar, 54%; stainless rod, 36%; stainless wire, 15%; and tool steel increased 36%. Kephart further reported to the ITC commissioners that "these increases generally accelerated in the 1999-2000 period and have, in all instances, resulted in substantial losses in market share by U.S. producers. Ironically, these losses in market share have occurred in the face of increased demand for each of these products."

Following are excerpts of the testimony before the ITC on specialty steel products covered by the President's relief program:

Stainless Steel Bar
The volume of imports of stainless steel bar increased by 54 percent during 1996-2000, the period of investigation. Although U.S. imports declined between 2000 and 2001, if the volume of imports during 2001 were annualized, these imports would represent a 41% increase over 1996 levels. Imports also increased as a percentage of domestic production. Accordingly, there can be no question that stainless steel bar is being imported in increased quantities.

Strong demand for stainless steel bar existed during the period of investigation. Nevertheless, the U.S. stainless bar industry's data show downturn in almost every statutory criterion. As the volume of imports rose between 1996 and 2000, U.S. producers experienced declines in both production and employment levels, a dramatic drop in already precariously low capacity utilization rates, and a significant decrease in operating income from a modest profit to a loss.

Stainless Steel Wire Rod
Serious injury to the stainless steel wire rod industry has been a result of the increase in low-priced imports. By using aggressive pricing practices, foreign producers were able to significantly increase their shipments to the U.S. market.

Particularly noteworthy is that imports of stainless steel wire rod surged into the U.S. market even with antidumping orders already in effect. As a result of a 29 percent increase in imports during 1996-1997, the U.S. industry filed trade cases against Germany, Italy, Japan, Korea, Spain, Sweden, and Taiwan. Affirmative determinations in these investigations caused imports to abate to 1996 levels. However, by 2000, imports had surpassed 1997 levels to reach an historical high level of import penetration. In fact, imports from Taiwan and Italy, which were already subject to the antidumping orders, were the top two import sources of stainless steel wire rod in 2000.

In summary, the U.S. industry producing stainless steel wire rod is clearly being seriously injured. Despite strong demand, U.S. producers lost significant market share over the period of investigation. Furthermore, the U.S. industry's operating and financial data show substantial deterioration during 1996 to 2001. To remain competitive with the low-priced imports, U.S. producers have been forced to lower their prices to below costs. No other cause for injury except the increase in imports can explain the U.S. producers' price declines.

Stainless Steel Wire
Imports of stainless steel wire grew by 15% during the period of investigation and continued to increase in 2000 and 2001. The financial data reflect that the value of net sales declined by 12% during 1996-2000 and by 21% in 2000-2001. Operating income declined by 45 percent during 1996 to 2000, and fell from a slight profit in 2000 to a loss in 2001. Financial deterioration was reflected in the steadily increasing number of domestic producers reporting operating losses throughout the period of investigation. In 1996, only 2 of 18 domestic producers reported an operating loss. By 2001, 11 of 17 reported operating losses. Despite strong demand and declining unit costs, U.S. producers' operating and financial data show deterioration or stagnation.

Stainless Steel Cut-to-Length Plate
The volume of imports increased dramatically over the period of investigation. Although imports declined between 2000-2001, if the 2001 year-to-date volume were annualized, these imports would still represent an 83% increase over 1996 levels. Imports also increased as a percentage of domestic production, the ratio more than doubling, from 16.8% in 1996 to 36.1% in 2000. Most importantly, declining profitability culminated in operating losses on sales in 2001. These increasingly inadequate profits led inevitably to a significant decline (74%) in capital expenditures.

Tool Steel
Up to two years ago, tool steel operation at Timken Latrobe Steel, specifically the high speed steels, were the most profitable part of our business, and capital investment projects have been substantially targeted to support tool steel production. The situation has changed dramatically over the last two years and this dramatic change is directly tied to the recent flood of imports. Over the last two years the financial position has eroded from strong profitability to the point that Timken is now experiencing losses on tool steel operations. Timken Latrobe Steel is not alone in this respect. According to the ITC's public staff report, four out of seven U.S. tool steel producers are also reporting losses in 2001.

Allegheny Ludlum has not been able to get an adequate return on investments and profitability has declined significantly since 1996. Most recently, the financial condition has deteriorated to a level such that the tool steel operation will for the first time be in a loss position by the end of the year. The reason? Tool steel imports from off-shore sources have surged, capturing a greater share of the U.S. market, and have sent domestic prices into a never-ending downward spiral. For example, just in the first half of 2001, Allegheny lost over 20 percent of sales to lower-priced imports. The price war has had a devastating impact on Allegheny and on the domestic tool steel industry.

Specialty steel is the high value, specialized end of the steel business, explained Kephart. "We face higher demands to develop unique products, which in turn require the constant development of new processes and equipment. The demands upon our industry to maintain adequate levels of profitability are, accordingly, substantial. No company in our business can operate for any period of time at the levels of profitability that were reported to the commissioners. We believe temporary relief, coupled with efforts to reduce worldwide overcapacity, will allow each of our product sectors to regain their dominant competitive position, a position that has been severely undercut by reason of this most recent five year import surge."

The case now moves to the "remedy" stage, with the ITC scheduled to provide its recommendations to the President by December 19. President Bush will then have 60 days, until February 17th of next year, to decide what action he will take.

SSINA is a Washington, DC-based trade association representing virtually all continental specialty steel producers. Specialty steels are high technology, high value stainless and other specialty alloy products. While shipments of specialty steel account for only 2% of all steel shipped in North America, annual revenues of approximately $8 billion account for 14% of the total value of all steel shipped.

David A. Hartquist, an international trade attorney with the Washington, DC law firm of Collier Shannon Scott, PLLC, serves as lead counsel to SSINA.