Steel Producers Take A Hit
June 28, 1999
Domestic steel companies took a blow last week in the U.S. Senate, which voted against restricting imports into the country. Steelworkers demonstrated in Washington last week, but to no avail.
Much of the steel industry, especially the high yield issuers, have long been fighting against cheap imports from countries that they say are "dumping," or selling steel at below cost prices.
Northwestern Steel & Wire was the latest domestic producer to fall victim of lower priced competition, as it is said to be considering a refinancing of a $115 million issue of 9.65% notes of '01, as well as a revolving credit line. Its shipments fell throughout 1999 by 40% in total tons.
Other high yield names that have experienced a tough time as of late include Algoma Steel, Laclede Steel, and Geneva Steel.
There were, however, some steel companies in favor of the legislative bill because they use steel imports to produce their own, more durable, goods.
Some buy-siders said last year they thought the steel companies had a very good case against the foreign companies and further thought the domestic issuers would win practically all of their cases.
But the Senate last week sent a different message, indicating it did not want to adopt a protectionist attitude toward free trade, source said. The Senate vote, which went against the steel makers 57 to 42, actually was just on the debate allowed in the matter, but it essentially stopped the bill cold because now the subject can be numbingly filibustered on the Senate floor.
The other countries, such as those in southeastern Asia, saw exports as one way out of their economic problems, which made them export ever-increasing amounts, and the problem essentially fed on itself, investors said.