What's New at Berlin

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April 4, 2002

Dear friends and colleagues:

Most everyone I've spoken to in the last few weeks, mills (domestic and foreign), service center executives, trading companies and trade lawyers, were surprised by the unqualified support that the domestic flat rolled mills received from President Bush in his Section 201 decision last week that imposed 30% tariffs (30% in year one, 24% in year two, 18% in year three and 0% thereafter) on almost all flat rolled steel products. In the few weeks preceding the final decision, it appeared that the consensus was that the tariff would be 20%, or if a higher tariff were called for, it would be in combination with quotas. This quota and tariff combination was used for imported steel slabs purchased by the mills themselves for further re-processing.

For Tin Mill Products (TMP), imports held a market share of approximately 18% in 2001. Imports were 688,000 tons in an overall market of about 4 million tons. With a tariff of 30%, it will be difficult for foreign producers of TMP to justify sales to the US market at the current market price level, except for excluded items (items not made by US producers) exempt from tariffs. TMP have historically had very stable pricing year over year, with annual changes (up or down) limited to less than 5%. With the food container industry buying over 90% of all Tin Plate produced in the world, there's a built-in stability to the market as food consumption is more or less recession proof. The US producers will greatly welcome the increase in business and should quickly fill their lines to capacity. The stability in TMP is quite unlike the market for Cold Rolled (CR) and Hot Rolled (HR) steel where automotive and transportation, appliance, agricultural and construction industries are very sensitive to peaks and valleys in economic activity.

In CR and HR, there have been dramatic swings in spot market prices in the US over the last 5 years. The last 6 months have seen spot prices drop to all time, historic lows in December of 2001, and rise sharply by 30-60% since then. As there were foreign producers participating in the US market during the recent, lower priced period, though at reduced volumes from the year earlier, it's certain that some of these overseas producers would be able to absorb the 30% tariff, in light of the current, higher, spot market prices. However, 21 countries have a pending anti-dumping lawsuit filed against them for Cold Rolled Steel. These countries will have to wait for a hopefully, favorable ruling before they can take the chance of booking orders for the US market.

Where the flat rolled steel market goes in this next 6 - 9 months will have a lot to do with the demand (mixed forecast) of the automotive, appliance and construction industries, with the strength of the dollar (expected to remain strong), with the possible and likely re-start of LTV and Trico, with the overseas producers' commitment to retain some US market share, and with the outcome of the anti-dumping case on CR due shortly.

Among some of our customers, there has been some question and confusion about the impact of tariffs on the stainless steel sheet and strip markets. These products were not looked at in the 201 case. Some countries already have anti-dumping duties assessed against them from several years ago, and those duties still stand. This recent 201 case had nothing to do with flat rolled stainless steel.

At Berlin, we continue to focus on those things that have made us a successful company for 35 years, making continuous improvements to our already award winning, quality systems and customer service, forging mutually beneficial relationships with world class, quality steel producers, growing our core Tin Mill Products business and expanding our market share for Stainless Steel Strip and other light gauge metals that require precision slitting.

Wishing you all a healthy, happy, peaceful and prosperous 2002.

Regards,

Roy Berlin
Rberlin@berlinmetals.com

Other Newsletters:
July, 2006    July, 2005    March, 2004
September, 2003    January, 2003
September, 2001 May, 2001 January, 2001
August, 2000 April, 2000

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