Watch the Speed Limit

1. STEEL BUSINESS BRIEFINGSBB CHINAExport SeminarSHANGHAIApril 17 , 2007RESPONSIBLE STEEL MARKETINGByWilfried von BulowChairman The American Institute for International Steel (AIIS)Vice Chairman MAN Ferrostaal IncorporatedNew York, USA

2. Watch the Speed Limit • As with road traffic speed limits have to be observed in the export business as well. • Rushing steel into a market provokes hostile reactions. • Until end of 2006 rising imports from China could be defended. • Defense might wear thin, should demand slow. • Chinese export rush has caused only temporary oversupply problem in the United States.

3. Responsible or Prophetic Marketing? • In export business, responsible marketing can be interpreted as selling at pace/price that satisfies demand. • Potential problem for Chinese exporters are lead times. • Responsible export marketing is more complex when U.S. demand veers off. • U.S. steelmakers were cutting production to keep prices firm. • Given long lead times, was there anything the Chinese could have done differently?

4. Culture Clash: Competition vs. Discipline • If Chinese steel producers were as consolidated as their U.S. counterparts, better control would be expected. • As long as China’s splintered steel industry competes vigorously at home and abroad, it will continue to clash with the U.S. industry’s more disciplined approach. • Which approach is the more responsible? • Many market observers would associate “responsible” with the disciplined, stable price policy of U.S. steelmakers. • Demand side has to be taken into consideration.

5. Concern about Dimensions of Excess Capacity • Chinese steel export surge had other causes besides excess capacity. • China’s steel output now over twice that of the European community and more than four times that of the United States. • IISI membership includes steel manufacturers from around the world; they cannot be as direct as American steel company executives in their home country. • Steel report sponsored by several U.S. steel producers associations.

6. The U.S. Trade – Law Defense • Once you are targeted for alleged violation of U.S. trade law, the odds are against you. • The U.S. Commerce Department (DOC) investigating complaints rarely comes up with a negative decision. • The U.S. International Trade Commission (ITC) investigating complaints is usually more neutral in its findings. • Whether Chinese steel exports to the United States were traded unfairly and caused injury will be influenced by the prevailing political mood.

7. Market vs. Non-Market • The United States will look at China as a Non-Market Economy (NME). • As investment and operating costs in China are not set by markets, dumping margins are determined by using costs from “surrogate” countries. • Imports from NMEs are generally not subjected to subsidy investigations. • Now the U.S. steel industry and several other industries want China to be subjected to subsidy investigations as well.

8. Conclusion: A Difference in Standards • Assessment of responsible marketing varies among steel market participants in the United States. • Steel producers more likely see it as an obligation to adjust sales volume. • Legal definition of import marketing as laid down in U.S. trade law. • U.S. producers are free to practice freight absorption when competing in distant markets. • Responsible marketing has different meanings to steel consumers, producers and government officials.