Tariffs may not be enough to help iron ore fleet

Tariffs may not be enough to help iron ore fleet

Without stronger restrictions on slab, imported steel may continue to limit Great Lakes vessels

      The Bush administration's tariffs on some types of imported steel will probably not be sufficient to spark a recovery in the beleaguered U.S. Great Lakes iron ore shipping trades, according to industry experts.
      While some industry representatives described the limited tariffs as a fair compromise by the administration, many others question the benefits of the new policy for U.S. steel manufacturers and supporting industries, like mining and shipping.
      The administration March 5 announced that it would impose tariffs ranging from 8 to 30 percent over a three-year period on some lines of imported steel. However, the policy creates a duty-free quota for steel slab imports, the most relevant product in terms of Great Lakes shipping.
      Up to 5.4 million tons of steel slab per year can be imported duty free. After the quota is met, slab imports will face tariffs of 30 percent for the remainder of that year. The iron ore and other raw materials shipped by the U.S.-flag Great Lakes fleet are used primarily to make slab at U.S. mills.
      American Maritime Officers National Great Lakes Vice President Dan Smith said that, while the limited relief for the U.S. steel industry is welcome, "the new tariffs don't do much to improve the outlook for the shipping season or for the employment prospects of our Great Lakes members."
      In addition to the slab quota, the administration's policy exempts NAFTA partners Mexico and Canada, as well as about 14 developing nations, from tariffs on steel they export to the U.S. Mexico alone exports an estimated 1.6 million tons of steel slab to the U.S. each year.
      "Every ton of slab imported into this country takes cargo off the Great Lakes," said George Ryan, president of the Lake Carriers' Association. "The production of one ton of raw steel in a blast furnace requires 1.3 tons of iron ore, plus quantities of fluxstone and coking coal.
      "We support efforts to return America's steel industry to profitability and so endorse the tariffs imposed on various steel imports, but we feel our valid concerns were not addressed," Ryan said. "It is doubtful that the President's plan will increase Great Lakes iron ore shipments."
      Iron ore cargoes for domestic steel production represent more than 50 percent of the U.S.-flag dry bulk float on the Great Lakes each year. The decrease in demand among U.S. steelmakers is already being felt as the 2002 shipping season begins on the lakes.
      "On April 1, only 36 of the 67 vessels available for service were in operation," said Glen Nekvasil, vice president of corporate communications for the Lake Carriers. "We should have had 50 or more vessels in service, but demand for iron ore remains very depressed and the stone trade appears sluggish too.
      "As a result, eight U.S.-flag lakers are currently not scheduled to sail this season," Nekvasil said. "A ninth hull has no firm sail date and a tenth vessel has delayed its sailing date until early May."
      Over the life of the steel import crisis, demand among U.S. steel manufacturers for iron ore and other raw ingredients for steel has declined significantly.
      American Maritime Officers provides the licensed officers and stewards for nearly all of the U.S. Great Lakes fleet. During the 2001 shipping season, a number of vessels were not activated and many others were forced into early lay-up.
      Bethlehem Steel, which operates two ships manned by AMO, has entered bankruptcy, and Oglebay Norton Marine Services and American Steamship Co., which collectively operate 23 ships under AMO contract, agreed to consolidate operations this year. Oglebay Norton reported an $18.8 million loss in 2001, compared with a net income of $15 million the previous year.
      At press time, two fewer vessels than last year had been activated from their winter lay-up to begin the shipping season. As U.S. steel manufacturers prepare to make use of the limited relief afforded by the tariffs, Great Lakes ship operators and American mariners wait to see how their roles in the embattled steel trade will be affected.
      "How the season develops depends in part on how soon steel production resumes at the former LTV mills in Cleveland and Indiana Harbor," said Nekvasil at the Lake Carriers' Association. "That one company used to require about 9 million tons of iron ore in direct shipments, plus 6 million in the Lorain/Cleveland shuttle. Add in fluxstone, coal and fines and LTV accounted for about 17 million tons of cargo for U.S.-flag lakers."

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