STEEL EXPORTERS HIT US MARKET

Created: 12/6/1974

OCR scan of the original document, errors are possible

CENTRAL INTELLIGENCE AGENCY

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MEMORANDUM FOR: Mr. James Rooney

Office of the Council for International Economic Policy Old Executive Office Building

Exporters Hit US Market

In response to your request, we are forwarding the attached report on foreign steel deliveries to the US market. US steel imports rose sharply in the third quarter and preliminary data for October and November indicates that fourth quarter imports couldecord level. Foreign steel markets have begun to soften while the US market remains firm. Faced wtth weakening markets, Japanese and European steel producers have begun to lower their prices.

We will be happy to provide any further assistance on this subject.

urnce or KconorKic Kosearcr.

APPROVED TOR RELEASE DATE: JULm>)

UNCl'SSIFIELl

STEEL EXPORTERS KIT US MARKET

Foreign steel makers have begun shifting their attention to the US market as stool demand elsewhere weakens. Deliverie to tha USillion tons (metric) during the third quarter, the largest quarterly total2bove the previous quarter's imports. More than half the increase was attributable to Japaneserom the previous quarteralthough shipments from Canada and the Bonolux countries also rose sharply.

Data for October and preliminary statistics for November indicate the upward trend in steel imports is accelerating. Imports of steel productsillion tons in October,ver Septemberver the third quarter monthly average. Although the data is incomplete, November imports appear almost certain to equal October's level. Imports for the fourth quarter could reachillion tonsncrease over third quarter and one of the largest quarterly total's ever.

The recent surge in part reflects continued strong US demand. Output of steel was% during tho first aight months while demand for steel rose somewhat. Now orders for

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steel were upver last years record level and order backlogs were running up toonths on some steel products. Steel inventories, while reachingillion tons in October, were below normal levels. The November coal strike postponed what appeared tooftening in US domand by curtailing steel production. The underlying trend, however, is likely to resume with the ond of the coal strike.

Foroign steel domand is already weakening. Earlier this year domand held up by high levels of capital spending on new plants, big jumps in orders for oil exploration and processing equipment, and the rapid pace of economic development in the LDC's. Restrictive economic policies and skyrocketing' construction costs, however, have reduced capital spending, especially in developed nations. The rate of economicin LDC's is slowing as they contend with worsening inflation, balance-of-payments problems, and the rippling effects of recession in the developed nations.

Given these trends tho major exporters are likoly to continue looking to the US market as an outlet for their steel. Somo exporters recently have dropped their prices to improve their competitive position in the US market. Since September the Japanese have reduced their average price per tonhile some European steel prices have declined as muchecrease. If the US

market does ease, furthor price cuts may develop. Japanese steel firms already are intensifying their marketing effort for contracts, apparently with some success.

The Japanese probably feel little constraint on lining up contracts since they expect the voluntary export control program to expire in January. Although overall shipments this year will beelowillion quota in the OS market, the Jar/ernese have boon shipping steel. million ton annual rate since August.

CIA/OER

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