President Carter's plan to revitalize the U.S. steel industry ironically threatens the healthiest, most competitive and innovative branch of the industry -- the manufacturers of high-technology specialty steel products.
Amid the gloom that seems to surround the U.S. industry generally, with its closed-down mills and idled workers, the specialty-steel producers are a shining exception. m
Their products, from the turbine blades in jet engines to satellite and computer components, are sought after worldwide. Their plants are technological leaders.
But the specialty steel producers are not covered by the most important feature of the Carter plan, a new trigger-price mechanism that sets minimum prices for imported steel in order to protect U.S. companies agains lower-priced foreign products.
"We feel completely left out," said John Paulus, a vice president of Allegheny Ludlum Industries, a specialty steel producer.
The Commerce Department has agreed to see what can be done for the industry, but no measures are yet in sight, industry officials say.
"I know they feel offended," said Commerce Secretary Philip Klutznick. The specialty-steel industry's problems are under active review, and a decision should be made in six weeks on whether to include it under the trigger-price program, he said.
In the meantime, the industry's fear is that foreign producers, blocked by the trigger-price mechanism from pushing low-cost or subsidized basic carbon steel products into the U.S. market, will concentrate more on exports of specialty products.
That has begun to happen already, says H. W. Delano, vice president of Cyclops Copr., one of the leading specialty producers. The campaign is not directed against the industry's most sophisticated products, but rather at some of its bread-and-butter production. Imports of stainless steel bars in the first half of 1980 were 93 percent higher than in the same period a year ago, while stainless wire imports are 55 percent higher, said Delano. "These are the products that make it possible for us to produce high-technology steel for aircraft and satellites," he said.
The industry complains that these increased imports are being subsidized by foreign governments through various means, putting the U.S. firms at an unfair disadvantage.
For three years, the specialty-steel industry was protected by import quotas, but President Carter allowed the quotas to expire in February. The specialty industry then asked to be included in a new trigger-price plan, but so far the administration has refused. "They have been protected. The quotas have worked," one administration official said. There are risks as well as benefits in adding import restrictions, particularly in the steel sector where U.S. interests go directly against those of its steel-producing allies.
Moreover, a pricing formula for 30 or more specialty products would be unworkably complex, Commerce Department officials say.
The specialty-steel producers are a small part of the U.S. steel industry, accounting for less than 2 percent of the production in tonnage and 10 percent of the dollar sales.
They are, however, the mirror image of the trobled Bit Steel industry. A report this year on the steel industry by the Congressional Office of Technology Assessment sought to make such a distinction between the integrated companies -- the so-called Big Steel firms who ship 85 percent of U.S. steel output -- and the rest of the industry, notably the specialty producers and the smaller, "nonintegrated" mills. (The big companies are termed integrated because their operations span the full steel cycle, from iron production to manufacture of steel products.)
While the overall statistics on steel employment, profits and capacity show an industry in decline, the specialty producers and smaller firms in fact have been prospering, says Joel S. Hirshhorn, the OTA project director. "The size and importance of the nonintegrated carbon steel producers and alloy/specialty steel producers are increasing," he noted.
In his view, Small Steel is a potential winner for the United States in the worldwide competition in steel, and could grow even more rapidly to provide an important share of domestic steelmaking capacity.
Although the steel industry's overall low rate of capital investment has dismayed its critics, the specialty steel companies and small, nonintegrated firms have poured money into modernization.
The three years of import protection gave the specialty producers time to plan and invest, says Paulus. Allegheny Ludlum alone spent $100 million over the past three years on new equipment and facilities.
Thanks to their size, their modern plants and the products they make, these producers present few if any major environmental problems.
But whatever their virtues, Small Steel was largely overlooked in the bargaining that produced the Carter administration's Sept. 30 revitalization plan for the steel industry. For steel producers of all sizes, election years are crucial times when important concessions can be won from government -- particularly when the votes of jobless steelworkers are there to be won.