Will Administration and Congress strengthen “Buy American?”By Peter A. Buxbaum, AJOTAs recently as mid-November 2008, the US steel industry was reporting record profits. Then the effects of the economic meltdown began to be felt and the bottom fell out of the steel market. Factory orders hit a 28 year low in December, while auto sales declined 35% in December, the worst sales decline in nearly 40 years. The economic funk was reflected in both lower domestic steel shipments as well as decreased imports, a drop characteristic of decreases in the worldwide demand for steel as the economic downturn spread to developing countries like China and India. What remains to spur domestic demand for steel, save an eventual economic recovery, is the Obama administration’s economic stimulus package, now making it way through Congress. That bill, which could eventually total $900 billion, would allocate $90 billion towards steel-hungry transportation infrastructure projects such as road, bridge, and mass transit building and repair. Besides a disagreement over whether $90 billion is enough of an investment in infrastructure, the measure has also rekindled the debate over the extent to which government funded projects should prefer or require the use of domestic steel. Domestic manufacturers want the current state of affairs to continue, obviously, while advocates for steel consumers, such as the manufacturing and construction companies that would be participating in the infrastructure projects, want to let imports in to keep prices low. The current government policy prefers domestic steel by tacking on a 25% price premium to highway bids that include imported product. Pending Congressional legislation would require 100% domestic steel content, unless domestic product is not available, and would expand the program to include projects funded by the Department of Defense and the Department of Homeland Security. “The highly stringent Buy American preference program does not need further strengthening” said David Phelps, president of the American Institute for International Steel, a trade group that advocates liberal steel trade policies. Thomas Gibson, president of the American Iron and Steel Institute, a group that advocates for the protection of the domestic industry, disagreed. “By requiring the use of American-made steel products in these federal construction projects, this legislation will help to ensure that our national infrastructure is made with quality domestic steel products,” he said. “The use of these steel products will also create economic prosperity for steelworkers and steel communities across the nation.” What is beyond debate is that domestic and international steel numbers look dismal. US steel mills shipped 5,223,000 tons of product in November 2008, according to statistics supplied by the AISI, representing a 39.9% decrease from the 8,683,000 tons shipped in November 2007 and a 25.8% decrease from the 7,041,000 tons shipped in October 2008. Those numbers reflect the continuation of an earlier established trend. October’s figures were off 23.8% year over year and 11.1% from the previous month. US production for the year as a whole, 91 million metric tons, represented a 6.8% decrease, according to figures compiled by the International Iron and Steel Institute, a Brussels-based organization. An AISI analysis of these figures showed that demand from service centers and distributors, the automotive industry and the construction sector was all significantly lower. The only bright spot was the oil and gas sector: shipments were up 5.8% in November and 5.4% in October. On the import side, the Commerce Department reported that total and finished steel imports for 2008 were 31,703,000 tons and 25,739,000 tons, down 5% and 3%, respectively, from the 33,244,000 tons and 26,587,000 tons imported in 2007. Import activity declined precipitously toward the end of the year. Steel import permit applications for December 2008 of 2,009,000 tons represented a 15% decre