The Carter administration yesterday took the wraps off its newest international trade weapon - a set of minimum prices below which the sale of foreign steel will generally be forbidden in this country in the future.
On average these price floors are about 5.7 per cent below the present price of American-made steel on the East Coast. That is probably close enough to the U.S. levels to satisfy domestic producers, who have complained in the past that they were victims of unfair competition from foreign companies selling steel below cost in U.S. markets.
But the U.S. companies had no immediate comment on the administraion pricing plan.
One possible snag is that the U.S. companies plan to raise their prices 5.5 per cent Feb. 1. That would increase the gap between U.S. prices and the lowest price foreigners could charge to more than 11 per cent. There is a rule of thumb in the industry that says U.S. users generally do not buy foreign steel unless it is at least 10 per cent cheaper than the U.S. product.
The set of minimum prices is at the center of a complex program administraion officials designed to aid the financially troubled U.S. steel industry.
If a shipment of foreign steel arrives at a U.S. port below the minimum price, the government will launch an immediate, accelerated anti-dumping investigation to determine whether the steel is being sold below fair value, which is a violation of U.S. trade laws, Deputy Assistant Treasury Secretary Peter D. Ehrenhaft said yesterday.
The Treasury set the trigger prices at the cost of production of the world's most efficient producer - Japan - and included a profit margin and the costs of shipping, insuring and handling the steel between Japan and the United States, Ehrenhaft told reporters.
Treasury Under Secretary Anthony M. Solomon, who headed the task froce that devised the steel program, tried to satisfy the growing protectionist demands in Congress and the steel industry while averting a trade war over steel.
In the process, the administraion became convinced that the U.S. steel industry - which has laid off more than 20,000 workers since July - often has been the victim of selling below cost by foreign steel makers seeking to keep employment up even though losing money on exports.
The Treasury computed reference prices for 17 basic steel types such as cold-rolled sheet (used in cars and appliances) and plates (used in heavy construction).
It must still announce prices on several import categories - such as wire and tubular products - as well as the "extras" that are usually added on to basic steel prices in an order.
Nearly all steel that is sold has some "extra," which usually means fitting a customer's specification such as precise size, treatment of the ends of the steel, addition of one or another chemicals, and the like.
Extras often add 100 per cent to the cost of the steel purchase.
Robert W. Crandall, deputy director of the Council on Wage and Price Stability, told reporters that the 17 products have an average trigger price of $330 per ton on the East Coast (it is less on the West Coast because of lower transportation costs from Japan. Domestic steel averages about $350, he said.
Importers usually add another 3 to 4 per cent, according to Crandall. That would mean U.S. customers actually pay about $340, 2.9 per cent less than the list price at domestic mills.
If U.S. steelmakers put a planned 5.5 per cent price increase in place on Feb. 1, the difference between the average prices would be closer to the 10 per cent level at which most industry analysts say steel users being to buy foreign steel.
Imports last year accounted for about 16 per cent of total U.S. steel consumption, but rose to close to 20 per cent during the last several months of 1977.
The administration actually calculated four different reference prices for each basic steel commodity, to reflect the different costs of shipping from Japan to four major U.S. regions; the East Coast, the West Coast, the Gulf Coast and the Great Lakes. The highest reference price is for the Great Lakes, the lowest for the West Coast.
Ind devising the prices, the agency assumed that the Japanese steel industry operated at about 85 per cent of capacity - which the industry has averaged over the last 20 years - although in recent months it has been turning out only about 70 per cent of its capactiy.