STEEL NOT READY TO FEND FOR ITSELF

The European Community had hoped that by 1985 its steel industry's problems, by and large, would be worked out.

The Reagan administration in 1984 announced a program that by 1989 would have enabled the U.S. steel industry to regain its past competitiveness.It appears that the EC will extend some kind of governmental support for its mills through at least 1990. The 1985 deadline for letting the industry fend for itself was not met. Production, price and import controls remain.

David Roderick, USX Corp. chairman, and other U.S. steel company executives, are already talking freely about the need to continue U.S. government assistance past 1989 for their firms.

The basic outlook for both the U.S. and EC steel industries is unpromising. Lenhard Holschuh, the International Iron and Steel Institute's secretary general, recently estimated that steel demand in the industrial nations will remain virtually static over the next 10 years.

Mr. Holschuh projects that by 1990 the steel making capacity of the major industrial countries will sink to 442 million metric tons, almost 100 million tons less than in 1980.

The developing countries, whose sharply rising exports in recent years have contributed to the U.S. steel industry's woes, are likely to keep building capacity, he forecasts.

U.S. steel executives' espousal of import restraints beyond 1989 reflects their feeling that the Reagan administration's existing import restraint program is not giving the industry the breathing time promised.

The program's premise was that by cutting back the foreign share of the U.S. steel market, U.S. mills could earn the profits and win the loans enabling them to modernize and compete against the world.

The U.S. industry, by most accounts, is becoming more productive, as less efficient facilities are closed and more advanced ones put on stream. Industry jobs are less than half of the number eight years ago.

But declining steel demand - down at least 5 percent in the United States last year - and low-priced imports dash industry hopes of a return to profits. Last year, the industry incurred a fifth successive year of net loss, probably close to $2 billion.

Steel imports were down in 1986 from 1985 by more than 10 percent.

It was the second straight year of an import decline, after a record 24.3 million net tons entered in 1984. The import share of the market was lower, too - slightly over 23 percent, it is estimated.

But this level remains substantially above the 20.2 percent target the Reagan administration set in a 1984 program to help the industry compete. Industry officials do not expect the 20.2 percent to be reached during the life of the program.

The industry's problems are likely to be addressed in Congress this year. One probable focus of action is a legislative proposal to impose unilateral import quotas on steel from Canada, Taiwan and Sweden.

They are the three biggest steel supplier countries refusing to join the EC, Japan and over a dozen other nations in formally agreeing to limit exports to the United States.

Canada is the biggest sore point for the American Iron and Steel Institute. Rather than falling, Canadian exports rose last year past 3 million net tons. The Canadian government is reportedly trying to jawbone Canadian steel firms to restrain their exports, but it's not having an effect.

Sen. John Heinz, R-Pa., and Rep. John Murtha, D-Pa., are expected to push hard this year for quotas on Canada, Taiwan and Sweden, although Taiwan recently promised to halve its steel shipments to the United States.

The Canadian exports, U.S. officials confirm, are a major reason why the administration's target of getting imports down to about 20 percent of the U.S. market has not been achieved.

Whether the administration will press Canada for formal controls is unclear, however.

Another big reason for the relatively high market share retained by foreign suppliers, officials say, is that U.S. demand has been dropping so fast. Foreign governments have been unable to readjust export restraints with equal speed.

The 12-nation EC meanwhile is struggling with its own steel industry problems. Pressed by its steel producers, the EC last month again failed to carry out fully plans to phase out production controls.

Eurofer, which represents the bulk of EC steel companies, will submit to the EC Commission by March 1 a proposal to maintain production quotas through 1990, while gradually eliminating them.

As of now, the EC plan is to end the quotas completely by the end of this year.

In a recent visit here, two high Eurofer officials - Jean-Pierre Ulrich

from France and Albrecht Korman from West Germany - argued against such a sudden phaseout. It would bring chaos to the European steel market, possibly leading to unwarranted plant close-downs, they warned.

The EC steel industry already has cut capacity by over 30 million metric tons since 1980 and Eurofer promises another 12 million ton scale-down by 1990, under its plan.

A key to the Eurofer plan is a stipulation among EC steel producers on how each firm is willing to reduce its capacity. And independent EC producers, not members of Eurofer, would be expected to participate.

It should test whether the European Community is really a community.

For the full story: Log In, Register for Free or Subscribe