Washington, Sep 20, 2001 - I’d like to thank the Chairman and members of the Commission for allowing me to testify today, and for their work on this issue. Mr. Chairman, by all accounts, the United States steel industry is reeling. In recent years, 22 domestic steel companies have been forced into bankruptcy, and more than 23,000 steelworkers have lost their jobs.

Steel prices are at a 20-year low. Though the U.S. steel industry has cut the cost of producing a ton of flat-rolled steel by $30 over the past 5 years, the market price has fallen by a whopping $93/ton, leaving the industry with a $44 loss on every ton produced.

In the last year alone, prices for hot and cold-rolled sheet have fallen by over 20%. Stock prices and debt ratings of American steel companies are at extremely low levels. In recent months, the steel industry has operated at levels as low as 65% of its capacity. Now, some would suggest that the steel industry’s problems are of its own making; that American steel cannot compete with the rest of the world because American producers are not as efficient as foreign ones. Nothing could be further from the truth. U.S. steel-making capacity is among the most productive in the world. Hot rolled steel producers in the U.S. can now produce a ton of steel with an average of 1.98 hours of labor. That compares to the Russian average of 10.7 hours per ton, the Chinese average of 7.8 hours, the Thai average of 5.9 hours, and the Indonesian average of 5.7 hours.

In fact, the American steel industry and American steelworkers over the past 20 years endured a painful period of restructuring that has transformed our industry into the world’s best. During this period, 450 facilities were closed, and over 300,000 steelworker jobs were cut. At the same time, $60 billion was invested to modernize plants with state-of-the-art technology. The result was a 180% increase in productivity, and a 62% decline in employment cost per ton. Rather than American inefficiency, the true cause of America’s steel crisis is the global over capacity in steel production. The rest of the world produces more steel than it needs, and the U.S. is forced to absorb it.

Currently, the world produces 300 million tons more steel than it consumes. A full 70% of this over capacity is located in three regions: the Newly Independent States of the former Soviet Union, the European Union, and Japan. By contrast, the United States produces 7 million tons less than it needs, making it one of the only industrialized nations that lacks steelmaking capacity to meet domestic demand.