New Players in the Global Steel Market

Introduction
In light of the instability caused by Russia's emergence as a major exporter in recent years, U.S. steel workers and producers have expressed concern about new players that may begin to compete
internationally. Three of these players, China, India, and Ukraine, have raised the most concerns as
potential threats to the global steel market's stability, particularly given the continued aid of their respective governments.
Although China is the world's largest crude steel producer, its export potential may not be as great as overall production might suggest, due to its relatively small number of efficient producers. However, the Chinese government is undertaking a concerted effort to upgrade key producers. Government planned and supported investment projects will improve production techniques and product quality. And a government-directed consolidation of the industry will concentrate steel production around a small number of large industrial conglomerates. The Chinese government intendes for these producers to enjoy the full benefits of economies of scale and diversified business operations. If the domestic market cannot absorb their production, they could become more significant exporters, and continued government support raises concerns about the potential for unfair trade. With China's accession to the World Trade Organization (WTO), the United States will have available several key new mechanisms for addressing trade concerns, including a special safeguards mechanism for import surges and increased disciplines for subsidies.
Ukraine has significant potential for exporting large volumes of steel in the near term. While Ukraine was not a major player in the 1998 steel crisis, prior to and since 1998 Ukraine has exported large volumes of steel to the United States. Most of Ukraine's steel production facilities remain government-owned, and the government continues to focus on steel exports as a way of revitalizing the formerly state-controlled economy. The government's involvement in the steel sector increases the potential for unfair trade in international steel markets.
India could also become a substantial exporter. Over the past few years, domestic demand in India has greatly decreased, increasing the need for Indian steel producers to export their products. In addition, government subsidization has created a steel sector that has a large amount of overcapacity. Given the government's involvement in the steel sector, the possibility of unfairly traded steel entering the global market rises as India increases its exports.

The Ukrainian Steel Industry
The Ukrainian steel industry has a number of impediments to its international competitiveness. Both
domestic consumption and shipments to its leading foreign customer, Russia, have plummeted. Most of its steel production continues to be based on outdated, inefficient technology. It suffers from high input costs, particularly for energy. And it has failed to enact a serious program of privatization thereby losing access to much needed investment, innovation and management know-how.
Despite these difficulties, Ukrainian steel producers have set their sights on exports as never before, raising a number of concerns for the U.S. steel industry. In its strong support of the steel industry, the Ukrainian government has taken several measures:
- Designating the steel industry a national champion and looking to it to generate hard currency and
drive economic development. To guarantee steel's future, the government has maintained
production levels and implemented a modernization program to upgrade the capital stock of
targeted producers.
- Tolerating market distorting practices that have kept uncompetitive, state-controlled steel companies from closing. These include continued use of barter and bankruptcy protection.
- Dispensing to Ukrainian steel companies a range of government assistance including: reduced or
exempted taxes, forgiveness of debts and preferential interest rates.
In addition, a U.S. trade case against Ukraine could indicate an attempt to replace Russian steel imports halted by U.S. antidumping actions during the U.S. steel crisis. The case, involving cut-to-length plate, resulted in relief for U.S. steel producers in the form of a quota arrangement.
Profile of the Ukrainian Steel Sector
In 1999, Ukraine ranked as the eighth largest steel producing country in the world and generated over 27 million MT of crude steel. Steel production in 1998 amounted to 23 percent of Ukraine's total industrial output. In contrast, during the same year, steel in Russia comprised only 4.1 percent of total industrial production. Considering that steel in Ukraine accounts for a larger share of GDP than in any other former Soviet Republic, the Ukrainian government has placed great emphasis on utilizing the steel industry as a key component of future economic development.
Ukraine's Big Four
More than half of Ukraine's total annual crude steel productive capacity is concentrated in its four largest integrated steel mills. Kryvorizhstal has annual capacity of 10.6 million MT, or almost one-fifth of Ukraine's total steel capacity; Mariupol's annual capacity is 7.2 million MT; Azovstal's annual capacity is 7 million MT; and Zaporozhstal's annual capacity is 4.8 million MT.86.