Dear Sir:

Leslie Wayne’s article "Big Steels" Problems are Home Grown" (NYT April 29) was interesting. Home grown, as-in made in the USA, is correct, however it is due to misguided foreign policies not the U.S. industry.

As a former CEO of an American alloy steel producer, I have visited and studied steel markets and plants in the European Common Market, Poland, South Africa, Mexico, Australia, New Zealand, Japan, and Manchuria, China. The industries in those countries enjoy an "in-the-national-interest" protection that the U.S. industry does not. Their protection provides a compensatory pricing structure within their domestic markets and export incentives for their production surpluses to be sold into the "world markets", generally to the U.S. Surplus Russian production is banned from the E.U., thus it comes to the U.S.

Technically, Ms. Wayne’s article is flawed. Flat-roll products made from revert scrap can indeed find many applications, but not in end uses which require significant cold forming. The so-called tramp elements in scrap; copper, tin, nickel, chromium, etc. negatively affect the ductility of cold-rolled steel used in automotive, appliance, and similar applications. Steel free of these elements is only sourced from iron reduction in an integrated operation.

Also, it is only in large and mature industrial economies that there is enough scrap recycling at reasonable transportation costs to support significant electric furnace mini-mill complexes. Nucor, for example, has had to invest in an iron carbide plant to supplement scrap availability.

Ms. Wayne errs when he suggests the mini-mills are healthy and Big Steel is sick. Check again; in the pricing depression experienced in the second half of 1998, imported steel, both finished and semi-finished, was entering the U.S. at prices barely above the price of prime scrap. Even the most efficient mini-mill cannot compete with that pricing structure, which caused acute financial stress on both mini-mills and the majors. "Dumping" was proven, and the International Trade Council (ITC) review confirmed those findings. Several mini-mills are in financial distress.

Why does the Administration waffle on this? Because Secretary Rubin, Fed Chairman Greenspan, Secretary Albright, and Secretary Daley encourage low-priced imports to keep price pressure on U.S. manufacturers, and to assist the source countries’ economies. The U.S.’s trading partners’ unemployment and economic distress is transferred to the U.S. creating enormously high trade deficits of historical proportions.

Chairman Greenspan decries quotas on steel – yet, what about other import quotas, e.g. sugar, where the U.S. domestic price is nearly double the world price?

Foreign steel producers also use cartel arrangements on certain products entering the U.S. market to avoid competing amongst themselves; a good example is tin plate, used in canning and similar specialty uses. European producers get the east coast markets, Asian the west coast and part of the gulf states, and non-U.S. American producers get the south and mid-west. The pricing is firm, and under home-market prices. The Administration turns a blind eye to this because in their view, it is not "in the national interest" to upset our trading partners and create a row in the World Trade Organization.

The U.S. armed services view it in America’s national interest to have economically healthy American steel producers as sources of carbon, alloy and tool steels in all forms: flat rolled, long products, tubing, forgings, etc. Other nations believe the same and appropriately support their industries. Regrettably, this Administration does not, to our national risk.

I served on the board of Weirton Steel from its ESOP inception until 1996. That work force deserves a chance to make its ESOP succeed. It cannot succeed, however, nor can the mini-mills, if this Administration refuses to impose the dumping penalties arrived at through due process, preferring instead to engage in some form of "negotiation" in which the U.S. industries get the leftovers.

Sincerely,

Dr. Phillip H. Smith