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Tuesday, 18 December, 2001, 13:54 GMT
Steel production cuts 'possible'
US steel company
Several US steel companies have filed for bankruptcy
Some of the world's biggest steel producers have said they could cut capacity to boost the price of steel.

At a news conference in Paris, EU Trade Commissioner Pascal Lamy said Europe could cut capacity, following earlier reports that both the US and Japan were prepared to make cuts.

The talks - which began on Monday - have identified overcapacity of some 100 million tonnes in the global steel market.

However the chances of these cuts actually being implemented is thought to be substantially diminished by the threat of a trade war as US steel makers pressure President George Bush to curb imports.

The steel producers are set to meet again in February and then in April to discuss capacity cuts.

'Blatant protectionism'

The International Trade Commission (ITC) is expected to recommend on Wednesday that the President give up to four years of import relief, which could include tariffs of up to 40% on some types of steel.

President Bush will have up to 75 days - essentially until mid-February - to decide whether to approve the ITC recommendations.

Mr Lamy has called the potential action "totally unwarranted" and a "blatant call for protectionism".

Following his offer of capacity cuts - of 13 million tonnes of crude steel and 16 million tonnes of finished products - on Tuesday, Lamy said: "Of course this is highly dependent on the whole process and notably on the way the US will behave."

"What we have decided to do today is set the ball rolling by saying that we are willing to deliver something concrete in the way of 16 million tonnes of cuts in our capacity between now and the end of 2002," Anthony Gooch, a spokesman for Pascal Lamy told the BBC's World Business Report.

"This needs to be part of a global package and obviously it needs to be part of a package which does not involve threats of people closing their markets," he added.

Overshadowed

Those attending the meeting said it was clear that capacity could be cut.

Earlier reports from the Paris meeting suggested that Japan was prepared to cut capacity by 28 million tonnes while the US will cut capacity by between 13 million and 17 million tonnes.

"The overall atmosphere in the meeting is quite positive. The delegations acknowledged that we have to do something because the situation is drastic," Iwao Okamoto, director general of Japan's Manufacturing Industries Bureau, said.

"Whether it is enough actually to have an affect on price and restore some pricing power in the steel industry, we will just have to see," the US under Secretary of State for Commerce Grant Aldonas told the BBC's World Business Report.

"The mood in the room was very good yesterday, but there was some hard bargaining last night," he added.

As the potential threat of import curbs overshadows talks, some say the US steel producers could do more to make their industry more competitive.

US woes

US steel producers argue that they have had to compete with state-subsidised steel companies from elsewhere.

Mr Aldonas questioned whether the US could do more. "For the last 20 years, we have reduced capacity by about 50 million metric tonnes...employment in our steel industry is about 64% down over that same time period," he said.

As many as 26 steel firms have been forced to file for bankruptcy in the US since 1998.

Some of the biggest steel companies - such as US Steel - say consolidation is the only way they can survive.

The industry has been hit by cheap steel imports, which flooded in following the Asian crisis, as well as rising healthcare and pension costs.

The International Iron and Steel Institute says the US accounts for about 12% of the world's total raw steel output.

 WATCH/LISTEN
 ON THIS STORY
Philip Tomlinson, CRU metals consultancy
"Overcapacity is not the core problem...the problem is the need for restructuring"
European Commission spokesman Anthony Gooch
"It needs to be part of a package which does not involve threats of people closing their markets"
Grant Aldonas, Under Secretary of State for Commerce
"Whether it is enough to have an affect on price...we will just have to see"
See also:

10 Dec 01 | Business
Steel firms mull merger to survive
05 Dec 01 | Business
US steel giants eye merger
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