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SPIKE IN METAL PRICES, PART II

HEARING

OF THE

COMMITTEE ON SMALL BUSINESS 

HOUSE OF REPRESENTATIVES

ONE HUNDRED EIGHTH CONGRESS

SECOND SESSION

WASHINGTON, DC, MARCH 25, 2004

Serial No. 108–59

Printed for the use of the Committee on Small Business

(

Available via the World Wide Web: http://www.access.gpo.gov/congress/house

COMMITTEE ON SMALL BUSINESS 

DONALD A. MANZULLO, Illinois, Chairman 

ROSCOE BARTLETT, Maryland, Vice 

Chairman 

SUE KELLY, New York 

STEVE CHABOT, Ohio 

PATRICK J. TOOMEY, Pennsylvania 

JIM DEMINT, South Carolina 

SAM GRAVES, Missouri 

EDWARD SCHROCK, Virginia 

TODD AKIN, Missouri 

SHELLEY MOORE CAPITO, West Virginia 

BILL SHUSTER, Pennsylvania 

MARILYN MUSGRAVE, Colorado 

TRENT FRANKS, Arizona 

JIM GERLACH, Pennsylvania 

JEB BRADLEY, New Hampshire 

BOB BEAUPREZ, Colorado 

CHRIS CHOCOLA, Indiana 

STEVE KING, Iowa 

THADDEUS MCCOTTER, Michigan 

NYDIA VELA ́ ZQUEZ, New York 

JUANITA MILLENDER-MCDONALD, 

California 

TOM UDALL, New Mexico 

FRANK BALLANCE, North Carolina 

ENI FALEOMAVAEGA, American Samoa 

DONNA CHRISTENSEN, Virgin Islands 

DANNY DAVIS, Illinois 

GRACE NAPOLITANO, California 

ANI ́BAL ACEVEDO-VILA ́ , Puerto Rico 

ED CASE, Hawaii 

MADELEINE BORDALLO, Guam 

DENISE MAJETTE, Georgia 

JIM MARSHALL, Georgia 

MICHAEL MICHAUD, Maine 

LINDA SA ́ NCHEZ, California 

BRAD MILLER, North Carolina 

[VACANCY] 

J. MATTHEW SZYMANSKI, Chief of Staff 

PHIL ESKELAND, Policy Director 

MICHAEL DAY, Minority Staff Director

(II) 

C O N T E N T S 

WITNESSES

Page 

Holmes, Ms. Constance, National Mining Association ......................................... 4

Cowan, Mr. Ed, Beck Aluminum Corp. .................................................................. 6

Rupp, Mr. Joseph, Olin Corporation ...................................................................... 8

Lindstedt, Mr. John, Artistic Plating Co., Inc. ...................................................... 10

Vincer, Ms. Charlotte, Riverside Spring Company ............................................... 13

Loftus, Mr. Patrick, High Steel Structures, Inc. ................................................... 15

APPENDIX

Opening statements: 

Manzullo, Hon. Donald, Chairman ........................................................................ 28

Prepared statements: 

Holmes, Ms. Constance, National Mining Association .................................. 34

Cowan, Mr. Ed, Beck Aluminum Corp. .......................................................... 43

Rupp, Mr. Joseph, Olin Corporation ............................................................... 49

Lindstedt, Mr. John, Artistic Plating Co., Inc. ............................................... 54

Vincer, Ms. Charlotte, Riverside Spring Company ........................................ 69

Loftus, Mr. Patrick, High Steel Structures, Inc. ............................................ 71

(III) 

(1)

SPIKE IN METAL PRICES, PART II 

THURSDAY, MARCH 25, 2004

HOUSE OF REPRESENTATIVES, 

COMMITTEE ON SMALL BUSINESS

Washington, D.C. 

The Committee met, pursuant to call, at 9:35 a.m. in Room 2360, 

Rayburn House Office Building, Hon. Donald Manzullo [chairman 

of the Committee] presiding. 

Present: Representatives Manzullo, Kelly, Akin, Bradley, Udall, 

Napolitano and Bordallo. 

Chairman MANZULLO. Good morning, and thank you for being 

here today as we examine further the spike in metals prices, and 

the effects on small manufacturers. 

Can you all see the chart back there? Well, most of you can. Just 

twist your necks. If you could tilt it just—that is good, that is good. 

This is the 57th hearing the Small Business Committee has had 

on American manufacturing issues since 2001. We especially want 

to thank several of our witnesses who have traveled great distances 

to be with us here today. 

Earlier this month our Committee held its first hearing on the 

issue of steel shortage by emphasizing the plight of manufacturers 

struggling with the sudden and unexpected surge in steel pricing. 

Unfortunately, this phenomenon was not limited to steel alone. 

Other metal workers, such as those in copper, nickel, and aluminum industries, are also facing historically high rates for the 

raw materials they need to fill orders, keep their shops open, provide jobs, grow our economy, and feed the families. 

For example, the price of copper soared to an eight-year high of 

nearly $3,000 a metric ton at the end of February. The price of 

nickel has more than doubled in the last year. Since September of 

2003, the price of aluminum has gone up an average of 15 cents 

per pound. 

As we stated in our last hearing, these manufacturers are stuck 

between purchasing the raw materials they need at these inflated 

prices, and filling orders they have already set prices for contractually. While some shops have been able to pass these increases 

along to their customers, many cannot, and it is threatening their 

very livelihoods. 

The charts we have today, as well as attached to our statement 

that can be picked up at our press table, document some of the 

global factors contributing to these spikes. 

Chart number one shows that while steel scrap imports into the 

United States have remained relatively stable over the past four 

years, steel scrap exports have nearly doubled. 

2

Christy, do you want to put the second chart up there? 

Chart number two shows the correlation between U.S. steel imports, which have steadily declined over the past six years, and exports, which again have remained relatively stable. 

Chart three shows the five countries that import the largest 

amount of U.S. scrap steel. China has become the number-one recipient of U.S. steel scrap, receiving 3.5 million net short tons of 

scrap in the year 2003. You can see just by looking at these charts 

the phenomenon that is occurring worldwide. 

Similarly, chart four—you are pretty good on those charts, 

Christy. It reminds me of, do you remember the old Johnny Carson 

Show, where he used to put up the directions to the guy with the 

car lot? You don’t remember that, Christy. 

[Laughter.] 

Chairman MANZULLO. I just turned 60 yesterday, so you have got 

to bear with me. I am having a very difficult time. I can’t believe 

I feel so good, I am 60 years old, you know? 

Similarly, chart four shows China’s insatiable need for steel and 

the raw materials to produce steel. Chinese steel consumption is in 

the blue there, and the Chinese steel production is in the barberpole stripe next to it. And you can see where China is falling way 

short of what their actual needs are. And obviously, the gap between what they produce and what they are consuming you can see 

continues to grow. And that is where the steel is going. 

In 1996 Chinese production and consumption of steel were about 

equal. In 1999 China started consuming more steel than it could 

produce, and that need has grown exponentially in the past five 

years. 

Production of automobiles in China is up 70 percent in one year. 

That is the growth of just that one particular industry. And most 

of that, I think 99 percent of that, is for domestic consumption. 

The thought then becomes what can we do about it. There is no 

easy fix for this, because we are dealing with a wide variety of 

market forces and global issues acting in unison causing these increases. 

That said, there are several steps that we, as a nation, can take 

to ensure we are doing all we can to make certain American manufacturers are on a level playing field with their counterparts 

abroad. 

First and foremost, the Administration must continue to fight 

unfair foreign trade practices. Many foreign countries are flouting 

international trade rules to get an unfair competitive advantage 

over U.S. manufacturers. This unfair advantage has increased the 

demand for their foreign products, which has increased their demand for U.S. steel and other metals, which increases the U.S. 

price for those commodities. 

China specifically manipulates its currency, and directly subsidizes its corporations to give them an unfair advantage in the 

buying power over U.S. companies. The Administration must continue to crack down on foreign currency manipulation, and should 

support the U.S. manufacturing sector’s effort to proceed with a 

Section 301 trade case against China for pegging its currency to 

the U.S. dollar. 

3

In addition, Congress should pass HR 3716—that is Congressman Bill English’s bill—to allow U.S. petitioners to file countervailing duty trade cases against non-market economies, which 

would allow us to get tougher on China’s trade abuses. I believe 

that law was changed not to allow that remedy in 1974. 

The Administration should also review all existing anti-dumping 

and countervailing duty orders placed on foreign imports of steel 

into the U.S. to see if they are warranted, considering the tightened markets in America. 

In addition, the Administration should immediately begin a 

study to consider the validity of imposing export controls on U.S. 

scrap steel. The Administration does not support export controls. It 

should draft a plan to negotiate the removal of current export restrictions on scrap steel and coking coal products imposed by Russia, the Ukraine, Venezuela, and China. 

Failure to remove the foreign export restrictions should result in 

a hiatus in the WTO accession process for Russia and the Ukraine. 

We must also work to lower energy costs for U.S. steel and metal 

producers. One of the factors driving up costs for U.S. steel and 

metals is the surging energy prices. The Senate must pass HR 6, 

the Energy Bill, with the President signing it into law, so that we 

can increase energy production in this country and lower the production costs for steel producers. 

We must also assess this problem within the context of our national security. The Department of Defense, and the Bureau of Industry and Security, and the Department of Commerce must examine whether the steel and metal shortages in America will have an 

adverse effect on our defense industrial base and our national security. They must determine whether the U.S. Government needs to 

enact the Defense Production Act to restrict the export of certain 

critical metals or raw materials necessary to defend the United 

States from its enemies. We must also garner a comprehensive review of the situation. 

The Administration, through the Department of Commerce or the 

U.S. International Trade Commission, via a Section 332 investigation, should examine more closely the reported shortages of scrap 

steel and coking coal to determine the effects they have had on production problems, and the overall competitiveness of the U.S. industry. 

Folks, time is of the essence. And we must begin taking action 

to bring metal markets back into balance. 

Our manufacturers are holding onto the thinnest of threads, and 

they need our help to remain the thriving backbone of our economy. 

Given the opportunity, these companies can and will recover 

what has been lost. But they can’t do it themselves. Our government must pave the way. 

Congressman Kelly, did you want to have a short opening statement? Because I know this matter is of critical importance to you, 

also. 

[Chairman Manzullo’s statement may be found in the appendix.] 

Ms. KELLY. It is a matter of critical importance to me. 

I don’t have an opening statement, except to say that Chairman 

Manzullo and a number of us are trying to really work on this 

4

issue. The broad extension of shortages and high cost into the U.S. 

economy is something that is very worrisome to a number of us. 

I want to say that I spoke with someone in the White House recently. I know that they are aware of this. There are a lot of people 

trying to work on it. It is not an easy problem. It is something we 

are going to try to work through, but because it is complex, it is 

going to take more time than we would like. And we, here in this 

Committee, feel the urgency. 

And Chairman Manzullo is a very good band leader on this. So 

I look forward to the testimony of this panel. 

But I also want you to know that we are trying to work on it. 

And everything you say here today will help give us some tools to 

work that battle with. 

Thank you. 

Chairman MANZULLO. Thank you, Mrs. Kelly. The rules are the 

testimony is five minutes. When you see the yellow light you have 

one minute; when you see the red light, I start to get excited. And 

if somebody gives me a gavel, I can begin to tape the gavel. 

Our first witness is Constance Holmes. Ms. Holmes is a senior 

economist and Director of International Policy of the National Mining Association. You can understand why she would be the first 

witness, because it all starts in the mines, doesn’t it, Connie? 

Ms. HOLMES. It does, indeed. 

Chairman MANZULLO. And we look forward to your testimony. 

You are going to have to pull that microphone up real close to you 

and speak very close into it. Thank you. 

STATEMENT OF CONSTANCE D. HOLMES, NATIONAL MINING 

ASSOCIATION 

Ms. HOLMES. Thank you very much. We really appreciate the opportunity to be here today. And we couldn’t agree with you more 

that the manufacturing industry, most especially the small manufacturers that are the backbone of our economy and job creation, 

is absolutely vital to our nation and to our national security. 

But we also need a very strong mining industry to support that 

manufacturing base. And because United States manufacturers 

have to have access to metals and raw materials that are available 

domestically to protect them from the uncertainties brought about 

by increasing dependence on imports and the vagaries of the world 

market. 

The strength of these two industrial sectors are vital for our national security and our economic security. 

I do have to preface my statement, Mr. Chairman, by telling you 

that our information that we use here today is based entirely on 

public record and historical information. 

You asked us to talk for a bit, to discuss the reasons that prices 

for raw materials, including base metals, have risen to current levels from the low prices that have been the norm over the past several years. 

As you know, the base prices aren’t set in negotiations between 

a supplier and a buyer, as some commodities are. Rather, they are 

established on the basis of supply and demand on a global market, 

through a commodities exchange, like the London Metals Exchange. And in the past five years, these prices have been very, 

5

very depressed due to a global surplus in supplies of metals and 

raw materials. 

In the past year, however, we have seen the market for these 

commodities move up quickly, and move from a supply surplus to 

a supply deficit. Strong economic growth, led by the phenomenal 

growth in China that you have so aptly illustrated in these charts, 

has increased the demand for all metals, raw materials, and energy. And again, as an aside, we agree with you on HR 6. 

But because we have had several years of surplus, and the accompanying low prices that that surplus has caused, investment in 

mining and the mining infrastructure has been very limited, not 

only globally, but particularly here in the United States. 

Globally, the reason is, in part, those low commodity price levels. 

But in the United States, where exploration expenditures last year 

were 66 percent lower than five years ago, and applications for new 

permits have fallen by 73 percent, there is a systemic reason. 

U.S. Government policies have actively discouraged, and sometimes even prevented, exploration and development of our nation’s 

great natural resource base. It has even been difficult to replace reserves as they are being mined out, even if you are trying to replace them at a local mine, existing mine. 

Two recent studies have shown that the U.S. is unfortunately 

ranked among the lease attractive places for mining investment. 

The top reason is the difficult, expensive, and very, very lengthy 

time frame associated with obtaining permits to explore, develop, 

and operate mining-related facilities, whether it is for a new facility, or whether it is to expand existing operations. 

And as you know, when a board of directors is faced with a 

multi-million-dollar decision, an investment choice between a location in the U.S., where it might take four to more than 10 years 

to put a mine on line, versus the same type of mine where return 

can start in one or two years, unfortunately the choice isn’t going 

to be in the United States. That hurts U.S. mining, and it hurts 

U.S. manufacturing, whether large or small. 

Until recently a decline in domestic mining wasn’t really viewed 

as being very significant, because demand for raw materials can always be satisfied either by buying from stocks in existing warehouses, or buying increasing imports. 

But as we have seen all too well, the ability to meet our requirements this way is very temporary. As global demand has improved, 

most metal markets have moved into a deficit, and demand growth 

has greatly exceeded the ability to increase supplies. 

But to make sure that manufacturers do not face a shortage of 

metals and other raw materials over the long term, it is imperative 

that we develop and implement a national minerals policy that allows our mining companies access to resources for development, 

and assures that these resources can be developed in a timely, socially and environmentally responsible manner. 

We have to address the permitting issue, reform the mining law, 

and reduce regulatory uncertainties. Actions that will help turn the 

U.S. from the least attractive location for investment to the most 

attractive location. We have to reverse the decline in mining, and 

reverse the need for our manufacturers to increase dependence on 

imported raw materials. 

6

In the short term, there is likely to be an increase in metals and 

raw materials production brought about by these current high price 

levels. Some of the increase may be in the U.S., but most is going 

to be off shore. 

But as a matter of economic security, we need a long-term solution to make certain that our manufacturers, our small manufacturers and our creators of jobs, and our large manufacturers, have 

the materials that they need to remain in business and remain 

competitive. 

And although we haven’t discussed national security issues, it 

goes without saying that we must maintain a strong manufacturing and mining base for those reasons, as well. 

Mr. Chairman, thank you, and we look forward to working with 

you and members of the Committee to find the solutions that will 

help provide additional supplies of our needed raw materials to 

power U.S. economic growth and jobs. 

Thank you. 

[Ms. Holmes’ statement may be found in the appendix.] 

Chairman MANZULLO. Ms. Holmes, I wanted to do something a 

little bit unusual here. Could you just take one minute to talk 

about copper? 

Ms. HOLMES. Yes. 

Chairman MANZULLO. Because that will segue into our next witnesses. 

Ms. HOLMES. All right, very good. The situation in the copper industry is not unlike the situation in every other metals and mining 

industry in the nation. 

Over the last five years, due to extremely low commodity prices 

for copper, we have reduced our mining levels by approximately 45 

percent, since the highs were reached in 1997. It just simply has 

not been profitable for any mining industry in the country over the 

last several years. 

The industry could be, and it is a very strong industry. It could 

come back in the United States, clearly. However, we do need to 

address the mining issues that I discussed in order to encourage 

and allow the copper industry and all of the other metals and mining industries in the country to be able to expand production, and 

do it as they always do, in an environmentally sound way. 

Chairman MANZULLO. Thank you very much. Our next witness 

is Ed Cowan, Vice President of Manufacturing of Beck Aluminum 

Corporation in Mayfield Heights, Ohio. Where is Mayfield Heights? 

Mr. COWAN. Cleveland. 

Chairman MANZULLO. Cleveland, okay. We look forward to your 

testimony. Thank you. 

STATEMENT OF EDWARD COWAN, BECK ALUMINUM 

CORPORATION 

Mr. COWAN. I saw the gavel, I am speaking fast. 

I am here today representing Beck Aluminum. We have two 

small manufacturing facilities, one in Cleveland, Ohio, and one in 

Lebanon, Pennsylvania. In the Sales and Marketing Group we 

have about 100 employees. 

7

We are pretty typical in our business, and we are in the secondary aluminum business. That raw material represents about 80 

percent of our product costs. 

And incidentally, secondary metal, just to put everybody up to 

speed, refers to metal made out of scrap or primary metals made 

out of ore. 

Our customers are mainly casters, and their raw material costs 

account for between 50 and 75 percent of their selling price, depending on the size and complexity of the castings. 

We came here today to give our opinion on what we think has 

happened. 

I will give you a little price history very quickly. The base alloy 

for our industry, the vanilla of the aluminum business, is A–380. 

The current price for that vanilla is 86 cents a pound. A year ago 

it was 73 cents a pound, two years ago it was 72 cents a pound. 

The increases in price that you see there are not as significant as 

you see in the other metals. 

In the 99.7 price over the same period, we went from a current 

82 to 68 a year ago, and 67 two years ago. And incidentally, those 

aren’t straight-line increases. If you look at the back of the charts 

that we have, they bounce around pretty well. 

A lot of people are blaming the metals price hike in aluminum 

on the Chinese purchasing scrap in the U.S. I think it is partially 

true. I think the real answer is there is a scrap shortage over here 

whether they take metal or not. It appears to me that this country 

could use about, oh, 9.75 billion pounds of aluminum scrap per 

year, of which we are getting about 8.25. And that billion and a 

half shortage is being absorbed by the primary producers who mix 

metal in to make certain alloys. 

Our business is getting what we need. What we have done is we 

stole some metal from those guys so we can make our product, and 

the price goes up. But the real bottom line is, we see about a billion 

and a half pound shortfall of scrap needed in the U.S. 

With that in mind, if there is a scrap shortage, how can the Chinese afford to buy scrap from our country? Well, the real answer 

is, and it is going to seem funny, there is a duty on primary aluminum in China. They put a duty on it because actually Chinese 

costs for production of aluminum are very high. They have high 

alumina costs for raw material. They have a high power cost. Obviously labor is low, but that is not the major concern for that. 

So what we have is, since their prices are arbitrarily high or artificially high for primary, they can afford to pay more for scrap. Because you can substitute scrap for some of the primary consumption. 

Now, in the last few months I have visited a lot of places in Boston, and I visited one in Baltimore yesterday to make the trip 

worthwhile. And every place I went to has a container going to 

China, of mostly low-grade material. I saw one place, I saw where 

they had pictures of warehouses—and one of our suppliers has just 

gotten back from China—where the warehouse is full of mixed metals, with women hand-sorting the metal. And I was told they make 

between $25 and $75 a month. I don’t know if those wages are 

right, but if it is, we are going to have a heck of a time competing 

on those mixed metals and sorting it. 

8

In January this year, it looked like China imported about 41,500 metric tons of scrap. That is less than they did a year ago. But I 

think the real answer was that the cupboard was bare here, and 

there wasn’t that much scrap to export, since we have been so 

busy. 

But there had also been a percent-and-a-half duty on scrap going 

into China. They rescinded that duty in January of 2004, so the 

spread between the primary metal and scrap is even wider. It 

makes our scrap even more affordable. 

Incidentally, the Chinese imported last year about 650,000 metric tons of aluminum scrap. That is almost identical to the 1.5 billion pound shortfall that we had. I should tell you that only about 

40 percent of that material comes from here. 

I have seen prices all over the map in my 30 years. I have seen 

prices as low as 30 cents, and I have seen prices over a dollar, and 

that was back in 1989. But what happens is that small companies 

like us have a problem when these prices get high. If Beck Aluminum has to finance 30 million pounds of sales a month, and we 

have to pay for 45 days of sales, that is about $30 million at 65 

cents. If it goes to 85 cents a pound, that is $38 million. Our bank 

doesn’t increase our line because the price of aluminum went up. 

We have to shrink our business. It makes it very difficult. 

A more disturbing fact to me I have seen this time is the fact 

that we have got a lot of parts going to China. Why are they going 

to China? We know they have high aluminum costs. What they do 

is have a subsidized casting cost. The companies are getting paid 

extra to export castings back here, whether it is for General Motors, a wheel, or to make a part. We had a guy lose a part to make 

a chalkline extender. It was a really cheap part, and they had to 

close the plant because it went to China. 

We also have our competitors going over there. China is looking 

to have our competitors go over there and build plants to help them 

recycle better. It may be a good idea, it may be a bad idea. But 

it seems to me that since we have the best technology, to go help 

them doesn’t seem like a really good idea. 

Now, as much as I am against duties, and I am against duties, 

is that I think that we have to look at what is subsidized coming 

over here. Because if we lose our customers, we are going to lose 

our scrap, we are going to lose the base. And if that casting is subsidized, we should find out what it is and do something about it. 

Thank you. 

[Mr. Cowan’s statement may be found in the appendix.] 

Chairman MANZULLO. I appreciate your testimony. 

Our next witness is Joseph Rupp, President and CEO of Olin 

Corporation, in the copper industry, from Norwalk, Connecticut. 

And we look forward to your testimony. 

STATEMENT OF JOSEPH D. RUPP, OLIN CORPORATION 

Mr. RUPP. Thank you, Congressman. I also represent, and am 

Chairman of the Board of Directors of the Copper and Brass Fabricators Council, and I appear before you today in both of those capacities. The Council represents between 80 and 85 percent of the 

total production of copper and copper-based alloy brass mill products, and there are 20 companies that are members of that. 

9

Copper scrap and copper-alloy scrap, along with copper cathode, 

are the most critical raw materials for the Council’s companies. We 

need large volumes of these materials at stable prices on a continuing and ongoing basis. 

Between October of 2003 and March of 2004, as you have already 

stated, the price of copper has increased from 78 cents a pound to 

$1.32 a pound, or an increase of 69 percent. And the other two 

major elements of that copper scrap have gone up at the same rate. 

These rapidly-increasing prices are explained by the scarcity of 

copper scrap and copper-alloy scrap, as well as copper cathode. Attachment four contains two tables that tell you what is going on 

from a copper scrap point of view in the United States. 

And similar to what my colleague just testified, what has happened in the United States from 1996 to 2003, the exports of copper-based scrap have grown from 397,000 metric tons to 735,000 

metric tons. And basically what has happened is the amount that 

was consumed in the United States, which used to be 39.4 percent 

supply exported, has now gone to 65 percent of U.S. consumption 

in 2003. 

There is a huge shift that has been occurring. More and more 

copper-based scrap has been leaving the United States, and the 

price of copper cathode has grown. Cathode pricing, as a result of 

the shortages, has seen premiums over Comex levels rise to levels 

we have never experienced before. 

There have been some spot shortages of copper-based scrap, and 

it appears possible that U.S. stocks of copper cathode could be depleted this summer. 

It would be difficult to over-emphasize how devastating the high 

prices and shortages of copper scrap and alloy scrap have already 

been, and might be in the foreseeable future. When we analyzed 

the data presented in some of the attachments, the picture arises 

that the major pressure on the global system is stemming from 

China. China has an insatiable demand for copper scrap, copperalloy scrap, and cathode. This intensity has been seen in the high 

prices and the immediate payment in cash offered by Chinese 

agents to United States scrap dealers. 

The Council’s members cannot compete on these terms, not because we are not efficient, but because the Chinese firms have unfair advantages that we do not have. And I am referring to the Chinese Government’s serious under-valuation of the yuan versus the 

United States’ dollar. The suspected refund to Chinese importers of 

copper-based scrap of most of the value-added tax when downstream products made from that scrap are subsequently exported 

from China. And lastly, other reported subsidies. 

It is also important, the imports of copper-based scrap into China 

are not being properly classified and valued, and consequently not 

the full imports duties and taxes are being paid. 

These difficulties are made worse by the trade deficit of the 

United States with China. A major issue for us is the cost of transportation from the west coast of the United States for copper scrap 

is less than it is for transportation of copper scrap from the midwest of the United States to the west coast. 

One other aspect of the situation that should be emphasized. The 

escalating costs and threats to import material availability cascade 

10

down the supply chain. They affect the lives of workers of many 

companies. Some of our customers have told us that imports from 

China of downstreamed copper and copper-alloy products are at 

prices that are equal to or less than the material cost of the same 

products that are produced in the United States. This is having a 

negative impact on our customers, as well as our Council’s members. 

In the area of free-cutting brass rods, screw machine companies 

in the industrial states of Illinois, Michigan, Ohio, Pennsylvania, 

and Indiana, and other places across this country, are left without 

customers for their end-use products. These small businesses are 

usually second- or third-generation family-owned companies with 

sales of $5 to $20 million, and employees of 20 to 150. The parts 

for faucets, valves, and industrial components that these companies 

produce from the free-machining brass rod cannot compete with the 

low-priced parts imported from China, and the sales of the United 

States parts are lost. 

With respect to other products such as copper tube, counterfeiting has arisen. These products are manufactured in China, labeled as being of United States origin, and sold in third-country export markets that traditionally have been supplied by the U.S. It 

is aggravating that this is occurring at a time when our economy 

is starting to improve. 

In conclusion, we are grateful to the Committee’s attention to 

these difficult circumstances. And we thank you, Congressman, for 

this opportunity to appear before you today. 

[Mr. Rupp’s statement may be found in the appendix.] 

Chairman MANZULLO. I appreciate your testimony. 

Our next witness is John Lindstedt, President of Artistic Plating 

Company in Milwaukee, Wisconsin, representing the nickel industry. 

And I am a Marquette Warrior. I graduated from law school 

there in 1970. Doesn’t that impress you? 

Mr. LINDSTEDT. I am a Badger fan, Congressman. 

[Laughter.] 

Chairman MANZULLO. You can still testify. 

Mr. LINDSTEDT. Thank you, sir. 

Chairman MANZULLO. A little bit of rivalry there, huh? 

Mr. LINDSTEDT. Just a little. 

Chairman MANZULLO. If you want to pull that microphone to you 

as close as possible, it will help out. We look forward to your testimony. 

STATEMENT OF JOHN LINDSTEDT, ARTISTIC PLATING 

COMPANY 

Mr. LINDSTEDT. Good morning, Mr. Chairman and members of 

the Committee. 

Artistic Plating is an electroplating job shop providing gold, silver, nickel, tin, and copper finishes for a range of industries, including power distribution, automotive, defense, and medical. 

I am testifying today on behalf of the National Association of 

Metal Finishers, the American Electroplaters and Surface Finishers Society, and the Metal Finishing Suppliers Association. 

11

Like numerous other industries, metal finishing plays a significant value-added role in the manufacturing supply chain. Virtually 

all metal products in commerce require the service of my industry. 

The metal finishings industry’s role in corrosion protection alone 

in the U.S. provides about a $200 billion annual economic benefit. 

My company’s experience on the metals shortage issues reflects 

very serious challenges faced by the larger metal finishing industry 

and related sectors. I will put it simply. At this point, the impact 

of intense price pressure on metals is one of the most troubling 

hurdles we face, even in the context of the long list of other excess 

overhead and cost factors that are dramatically diminishing our 

ability to compete. None of these costs have risen as dramatically 

as the cost of nickel. 

The price of nickel for my company has increased by over 300 

percent from 2002 to 2004. This is so, even in the light of several 

cost containment strategies we have pursued, including the formation of a holding company with several other metal finishing firms 

in the Milwaukee area, to share administrative services and to 

make bulk purchases. This organization purchases 300,000 pounds 

of nickel per year, and therefore we have one of the lowest prices 

in our region. 

The price increases we have experienced would be a lesser challenge if my material needs for nickel and other metals were relatively low. Yet no single overhead cost constitutes as large a cost 

to the firm as metals materials, so the impact price increases for 

nickel is magnified in every job that I quote. 

Nickel surcharges and price increases in the light of the current 

manufacturing dynamics cannot be passed on. Price increases 

equate to rapid job losses at my company and those of my peers. 

As a consequence, my firm is caught in a very destructive and rather agonizing dynamic. 

In this cost/price freeze I face many production costs that are beyond my control, and continue to rise, while at the same time the 

price of my service continues to be forced down. To remain viable 

I have reduced staffing levels by over 40 percent, ceased any unnecessary purchasing, and have not installed any new capital 

equipment in over four years. This is unsustainable in the long 

term. 

The phenomenon of metals pricing challenges results from the 

short supply of nickel and other metals. There are two main reasons for this. 

First, the shrinking American manufacturing base is not generating enough scrap to feed our own domestic needs. 

And secondly, the exploding manufacturing appetite of Asia, as 

you have so amply shown in your slides. 

I would like to leave you with at least one specific recommendation that would provide some relief. 

Under our current regulatory framework for managing the nation’s industrial waste, we are literally throwing metals away. I 

have spent over a decade under two administrations with my top 

colleagues in industry and leading decision-makers at the USEPA, 

to study the metal byproducts that we in the metal finishing industry generate from treating metals in our affluent under the Clean 

Water Act. The resultant treatment sludge, under these regulaVerDate 0ct 09 2002 17:06 Sep 22, 2004 Jkt 000000 PO 00000 Frm 00015 Fmt 6633 Sfmt 6633 G:\HEARINGS\93204.TXT MIKEA
12

tions, is defined as hazardous; and thus, the majority of these 

metal-laden products are shipped to expensive hazardous-waste 

landfills. 

In an extensive waste benchmarking study conducted by the 

USEPA, greater than 50 percent of all metal treatment sludges are 

chemically non-hazardous by USEPA definition, but continue to be 

a listed hazardous waste, based on a set of prerequisites that were 

developed 25 years ago, and are no longer true. 

The average metal finishing facility throws away an estimated 

$40,000 annually in these metals. The typical regulatory cost to 

meet these requirements is in the range of 6.5 percent of gross 

sales. 

Additionally, two of the primary metals involved are nickel and 

chromium. Both strategic materials for defense for which this country has no reserves. 

U.S.E.P.A. has been working on a rule to address this issue for 

several years now. And we are informed we may see a proposed 

rule package by the end of the year. This is a modest, yet promising, effort on the larger challenges we face. It is disappointing 

that it has taken this long to substantiate and reconfirm the policy 

rationale for modernizing these set of regulations. 

At this point, if all goes well, it will take another four to five 

years before this initiative may provide relief. This time needs to 

be shortened, and I would like to recommend this change in regulations as a challenge for the Committee to consider. 

Thank you. 

[Mr. Lindstedt’s statement may be found in the appendix.] 

Chairman MANZULLO. John, if you could have your Washington 

rep contact Joe here on our staff, we could prepare a letter to send 

to the EPA. I presume they are in the comment portion of the regulatory process now, is that correct? 

Mr. LINDSTEDT. They haven’t quite published it in the Federal 

Register. We are told hopefully about November. 

Chairman MANZULLO. All right. But if you could have your—

which group would it be? The metal finishers? 

Mr. LINDSTEDT. It would be, the term here in Washington is the 

SFIC, Surface Finishing Industry Council. 

Chairman MANZULLO. Okay. If you could have somebody there 

contact our staff, get hold of Joe, and then we would be glad to 

work with them on putting in some regulatory comment. 

Mr. LINDSTEDT. Thank you. 

Chairman MANZULLO. Thank you. Our next witness is a constituent from Rockford, Illinois. And I can’t remember, Charlotte, 

where we first met, but it was at one of our many forum, or fora, 

whatever it is, back home on manufacturing issues. 

Ms. VINCER. It was one of the Chamber meetings, I think it was. 

Chairman MANZULLO. Was that the one in Belvedere? 

Ms. VINCER. Yes, it was. 

Chairman MANZULLO. And you came forward, and we talked 

about some of the problems going on. And Charlotte is the owner 

and sales manager of Riverside Spring Company in Rockford. 

Charlotte, you are testifying here on the continuous shortage of 

steel, and the price continues to rise. We held our first hearing on 

this issue, when was it about, on March 10. And at that time, peoVerDate 0ct 09 2002 17:06 Sep 22, 2004 Jkt 000000 PO 00000 Frm 00016 Fmt 6633 Sfmt 6633 G:\HEARINGS\93204.TXT MIKEA
13

ple from the steel manufacturing sector and the scrap sector prophesied, to use that term, or forecasted, whatever it is, that the scrap 

shortage would see some amelioration, and that the price of steel 

had peaked at that point. 

So we look forward to your testimony so we can measure their 

evaluations. 

STATEMENT OF CHARLOTTE VINCER, RIVERSIDE SPRING 

COMPANY 

Ms. VINCER. Thank you, Mr. Chairman and members of the Committee. 

I truly appreciate this opportunity to share the effects the steel 

crisis has had on my small business, and many others. 

My name is Charlotte Vincer. I am the Sales Manager and Partner of Riverside Spring Company, a small family-owned spring and 

wire form business located in Rockford, Illinois. I am proud to say 

we began this business with one machine and one customer, 15 

years ago. 

Over the years we have had considerable growth and positive 

profit margins. However, we have all felt the impact of the few 

years through the economic downturn. And I, of course, like many, 

did not feel comfortable when NAFTA came into play. 

Today I wish to share with you how the steel prices have affected 

my business. I will tell you that what damage our business has 

sustained through the years of lost customers, by the consuming 

force of Asia and other countries, cannot even come close to the 

magnitude of the blow we have taken from this crisis. 

Our profit margins have been cut nearly in half, and we are exhausted from the endless task of providing proof to our customers 

to the explanation of why we have to pass this increase on to them. 

My dear friend, Scott Sommers, President of Freeway in Rockford, hit it right on the head. He said, ‘‘It all sounds good when our 

customers are willing to aid and work with us to combat this problem, but this is not a very value-added way of spending our day.’’

Something else that is very hard and imposed upon us is not 

knowing until the ship date what our cost or surcharge will be is 

absolutely pathetic, to say the least. 

To further our aggravation, all contracts from our steel suppliers 

have been broken. How do we quote anything, not knowing or having our costs in control? 

Also, to begin to search for new business at this moment is nearly impossible. 

By choice, I did not want to be repetitive by providing graphs or 

inflated proof of my rod and wire costs, as I am certain you have 

been saturated with much of that. I will tell you, however, my business is at a crossroads of enormous perplexity, humbly asking for 

a swift resolution to this problem. Flooded with calls from other 

small manufacturers, I am not alone by emphasizing that we do 

not have the leisure to wait six to eight months for this crisis to 

fix itself. And if it does fix itself, what is preventing this from repeating in 2005 and the years to follow? 

I know you are well aware that many small manufacturers and 

people in general in America have lost the majority of their jobs, 

customers, to China. Non-replaceable sources that have closed their 

14

doors took our profits in search of cheaper labor, no insurance 

costs, OSHA regulations, et cetera. 

Now, China’s economy is exploding, with our lost profits and inflating our steel costs to build up their economy. Adding salt to the 

wound, forcing us to raise our prices to our existing customers, putting them one step closer to considering China as a cheaper source. 

I hate to say this, but I see a pattern. 

In reevaluating the past, the honest thing to do is to first admit 

there has been a crisis for a long time. And although there may 

have been some recovery on the horizon, further disruptions such 

as this will only result in complete desolation of the few of us that 

are left. 

I, for one, cannot bear the thought of 15 years of hard work 

wiped out, and more so because this problem could not be resolved 

in a more expedient manner. 

I am just a small, simple business owner who can only offer no 

solutions of my own to this matter. To be quite frank, this is why 

I am coming to you. All I can do is to confirm what others before 

me have brought to your attention. There is a definite need for 

tougher trade policies, making certain from now on other countries 

understand that trade is going to be fair. And that the manipulation of the currency to the demise of our economy is not acceptable. 

Once again, there is an ongoing problem with health care, and 

itself has been an open sore in need of a long-time healing. 

Furthermore, we need tax breaks, especially for the manufacturers that are remaining in America. Sticking it out through this tangled mess, and with little strength that they have left to be the 

backbone of America, are driven to rebuild the manufacturing sector and provide much-needed jobs. Personally, I don’t want more 

loans, government or otherwise. God knows I struggle to pay the 

ones I have. 

Make no mistake, these are very challenging times for us, and 

it is taking every ounce of our energy, time, and finances to hang 

on. 

What I am hoping for is there is no more talk, only instead bold 

and speedy action to relieve this enormous burden so that we can 

get back to business. Six months or more of battling prices between 

our vendors and customers has been fatiguing. 

In closing, Mr. Chairman, I just want to add this. With my deepest sincerity, I am praying for the leaders of this great country. I 

am praying that God will give you the wisdom to make the right 

decisions, which will determine whether my doors will be open or 

closed within the very near future. 

Thank you. 

[Ms. Vincer’s statement may be found in the appendix.] 

Chairman MANZULLO. Charlotte, what are the kinds of springs 

that you make? 

Ms. VINCER. We make compression extension torsion springs and 

wire forms of all types. 

Chairman MANZULLO. And how many employees do you have? 

Ms. VINCER. We have five. 

Chairman MANZULLO. That qualifies as a small business. 

Our next witness is Patrick Loftus. Patrick is testifying on behalf 

of the High Steel Structures out of Lancaster, Pennsylvania, and 

15

also in conjunction with the American Road and Transportation 

Builders Association. 

Patrick, we look forward to your testimony. 

STATEMENT OF PATRICK P. LOFTUS, HIGH STEEL 

STRUCTURES 

Mr. LOFTUS. Thank you, Mr. Chairman. I appreciate the opportunity to be here. 

I actually wear three hats today. One is as President of High 

Steel Structures, who is a bridge fabricator in Lancaster. We build 

the superstructure for highway and railway bridges And we are 

technically not small; presently we have about 800 employees. But 

I also am past-Chairman and Executive Committee member of the 

National Bridge Alliance, and that represents about 120 member 

firms who are fabricators, and our average size is less than 100 

employees per firm. 

On the ARTBA side, I am President of the Material and Services 

Division. ARTBA is a large organization, as you know, with over 

5,000 members, representing most of the highway and bridge construction industry. But the M and S Division is smaller participants: people who do rebar, guardrail, small firms. Many WBEs, 

Women’s Business Enterprises, and many DBEs, Disadvantaged 

Business Enterprises. So we have a broad constituency. And we 

speak today from a consensus view of the industry. 

Steel is the largest component by far in the product that our 

company makes. And the recent unexpected increase in price has 

just left us frankly reeling. We are not sure where this takes us. 

We won’t go through the reasons for the increase, because those 

have been amply cited. But our prices have increased anywhere 

from 30 percent to 80 percent over the last year, average this year 

have gone up about 40 percent in price. 

Those of us in the highway and bridge business recognize that 

price changes are part of life, and we assume considerable risk because we are in a fixed-bid business. So we have to take a project 

provided to us by the DOTs, evaluate what is involved with it, review the drawings, and submit a fixed price to the general contractor for that work, based on the known conditions and scope of 

the contract, as defined. 

What has happened recently is the prices skyrocketed, and we 

have no way to compensate for that, because most of the projects 

on which we are bidding may be eight to 10 months later before 

we can actually order the steel. We have to do the detailed engineering drawings and submit those, and have them approved by 

the DOT, before we are even in a position to start to procure the 

steel. During that time the prices have changed dramatically. 

And I will give you two examples specifically of how that impacts 

us. In my company that I preside over, we presently have about 

$126 million worth of backlog, a substantial amount of work on the 

books, most of which we bid in 2003. 

Our cost overruns on the purchase of the steel material for that 

work would presently be in the neighborhood of $16 to $17 million, 

over and above what was in the bid when we estimated it. 

Now, those bids were based on firm commitments from the steel 

mills, from the steel suppliers. They have simply defaulted on those 

16

and said they will no longer honor them, and therefore we are 

stuck with that. 

If you take it to a slightly smaller scale, some of our member 

firms—we have a very good WBE supplier that works from Pennsylvania who presently has, within the state of Pennsylvania, 

about $10 million in steel backlog that she took under contract in 

2003. For her to purchase that steel today will cost her in the 

neighborhood of $16 million. So she is going to be in a loss position 

of $6 million on her present existing backlog. 

By definition, a WBE can only have a net worth of $750,000. She 

does not have a strong balance sheet to fall back on. She is not allowed to. So this would bankrupt here, literally. If she were to continue and perform on this work, it would immediately put her out 

of business, if her lending institutions would allow her to do that. 

And that is an immediate crisis that we are facing in the construction industry, is that we have a large number of small suppliers and material installers using steel, whether they are WBEs 

or DBEs or simply small business, that simply will not be able to 

honor their contracts, and will be forced to either go into bankruptcy or default. They have no choice. 

So it is an immediate and severe crisis. We have had a number 

of meetings with state DOTs and federal highway, trying to resolve 

this. 

Chairman MANZULLO. Patrick, let me interrupt you. Rebar. Do 

you want to talk about that? 

Mr. LOFTUS. Yes. It has gone up dramatically in price. It is probably a 70- or 80-percent increase. It is the same situation. 

Chairman MANZULLO. And its impact on road construction. 

Mr. LOFTUS. It is huge. A lot of the rebar is installed by small 

firms, and a lot of it is installed by DBE firms. If you take a project 

like the Woodrow Wilson Bridge project, the contractors there have 

to look very seriously at that. And they would have bid that back 

in May of 2003. They won’t actually be receiving the steel material 

until this year, at a greatly escalated price. In all likelihood, they 

will not be able to perform under that contract. 

We are in exactly that position with the steel superstructure for 

Woodrow Wilson. The price has increased about $6 million beyond 

what we had anticipated. And we put the contractor on notice that 

we will not be able to perform that contract. 

So what we have asked Federal Highway for, for all of the steel 

products in the Federal Highway-funded projects, is to look at this 

as a changed condition. When you bid a project, you have a set of 

plans and specifications, and you are responsible for the risk involved with that. But if there is a changed condition, something 

that you could not have foreseen or have anticipated—a soil problem, an environmental problem—that substantially alters the 

terms of the contract, you have the option to go back and amend 

that. 

So we have asked Federal Highway to put forth an emergency 

escalation clause as a changed condition, that would allow current 

contracts that were bid prior to March 1 of this year with material 

that is received after January of this year, to allow those to be considered a changed condition, and adjust the price for those projects. 

17

Absent that, you will have, this summer, many projects grinding 

to a halt, with suppliers and steel fabricators simply not able to 

fulfill the contracts, and the work cannot proceed. 

So it is an urgent crisis. You said earlier time is of the essence. 

It could not be more essential, because the fabrication for this summer’s heavy construction work should be going on now to have it 

ready to install during the summer. Absent some price escalation 

from Federal Highway, this will not happen. We are going to have 

projects all over the country shutting down. 

Our own company has 45 projects that are at risk today in seven 

states and the District of Columbia. 

Chairman MANZULLO. Road projects. 

Mr. LOFTUS. Yes. National major crisis. You can see construction 

just stopping. 

Chairman MANZULLO. If you could, when you get back home, 

quantify those as best as you can in a letter, on your letterhead, 

to supplement your testimony? Because I know how fluid what is 

going on here, the point they are showing that there is a shortage 

of steel with which to make rebar, therefore impacting the highway 

construction industry, and therefore not being able to actually do 

the building itself. If you could put that in a one- or two-page letter 

and get that to Joe by fax, I want that to be made part of your testimony. 

Mr. LOFTUS. I would be happy to do that. We have submitted 

written testimony, and we do have an economic analysis conducted 

by Dr. Buchner of ARTBA that is available, and we will submit 

that, as well. 

Chairman MANZULLO. Thank you, Patrick. 

Mr. LOFTUS. Thank you. 

[Mr. Loftus’ statement may be found in the appendix.] 

Chairman MANZULLO. Congresswoman Napolitano. 

Ms. NAPOLITANO. Thank you, Mr. Chair. And I know I don’t have 

to repeat this, but Chairman Manzullo has been at the forefront of 

bringing this to the attention of Congress and to this Administration. I think he has done a great job. 

I would also like to submit for the record the statement from CIF 

Stamping that was submitted for the record. I don’t know if you 

have it. 

Chairman MANZULLO. It will be made a part of the record, without objection. 

Chairman MANZULLO. The testimony of the witnesses, the complete written testimony will be made part of the record. 

Anybody wishing to augment the testimony of the hearing, if you 

could get that in to Joe within the next two weeks. Now, listen very 

carefully. It cannot exceed two pages, and the type cannot be less 

than 10-point. There is a reason we do that, okay. And that includes if you want to put a graph on there, only one page. So that 

limits you to three pages totally. And we will make that part of the 

record. 

Congresswoman Napolitano, we will restart the timer for you. 

Ms. NAPOLITANO. I guess CIF Stamping is disqualified, because 

he has got three and a half pages. 

Chairman MANZULLO. Well, all right. Well, four pages, thank 

you. 

18

Ms. NAPOLITANO. Well, the reason that I asked him to submit is 

because we did form a manufacturing task force. I advised you of 

that before. So they are bringing in information from not just 

themselves, but from others. 

But I certainly would want to tell everybody that we know, we 

feel it, we hear it. And yet, unless this Administration works on the 

base issues, on the core issues, there is nothing we can do except 

hold hearings and pass the information on. 

I could ask a ton of questions, but we already know. We have 

heard testimony from other individuals. Chairman Manzullo’s task 

force on manufacturing. We have talked to the individuals. And 

you are right, ma’am, it goes beyond talking; it is now in the action 

phase. And that has to do with whether or not this Administration 

is going to move in protecting the U.S. manufacturer. Because we 

have lost a lot of it, and we are in danger of going below the danger 

zone that we may not be able to continue manufacturing our most 

basic necessities here in the United States, especially for defense. 

So I really don’t have questions. I hear your pain. I have read 

a lot of your testimony. I know in my own area the small manufacturers are going out of business. They cannot afford the price. And 

if they are tied into their price that they are receiving for an order, 

and they have to pay beyond the price for their metal, they are in 

deep trouble. 

So I understand. I know, I hear a lot of the issues. And I am not 

sure whether, Ms. Holmes, whether you have any idea. And I know 

you say this might be a bubble, but how do we deal with it until 

that bubble bursts? 

Ms. HOLMES. You are right, Madame Congresswoman. It is an 

extremely difficult, difficult situation that everyone is facing. 

The answer for our industry, for the mining industry, which provides the products that all of my colleagues’ companies and manufacturers must have to exist competitively here in the United 

States has been facing similar difficult times over the last four to 

five years, brought about by essentially, as I mentioned in my testimony, a global surplus of commodity metals and base minerals. 

And such a surplus that here in the United States, and that, coupled with government policies that have discouraged our maintaining our mining base. Mining itself is almost at that point that you 

were referring to, the point of no return. And we have got to address that in the long term, as we pointed out in our statement, 

by going back and looking at the policies that discourage mining, 

and discourage a stable mining industry that is needed in turn to 

be able to supply our good customers with the products that they 

need to remain competitive and remain in business, whether it is 

a small manufacturer or a large manufacturer. 

And we certainly know that it is very, very difficult for small 

manufacturers especially to operate in these terms of fluctuating, 

extremely fluctuating price levels for their base products. 

But the answer is really a greater supply here in the United 

States. That is a long-term answer, though. 

Ms. NAPOLITANO. And I am hearing, we have done a lot of aluminum can recycling, we have done a lot of other kind of paper, 

and newspaper, and cardboard. Why have we not begun to focus on 

metal recycling? 

19

Ms. HOLMES. Others can certainly answer this question much 

more adequately than can I. But I do know that our companies, 

copper and brass and nickel and metal, metals of all types, are recycled as much as the law allows. 

One of the colleagues, I think you were here when you heard the 

testimony about some EPA regulations that prevent using materials that could possibly be recycled. And that is certainly something that we have to look at. 

But we are recycling as many of the commodities as we possibly 

can. 

Ms. NAPOLITANO. Is it possible, then, that you could submit to 

this Committee the information on those past policies that we may 

be able to address, so that we can begin at least to understand 

where we can have a starting point for that particular area? 

Ms. HOLMES. We certainly will. And we will submit those in very 

short order. Thank you. 

Ms. NAPOLITANO. Mr. Chair, there are several other questions, 

but I would like to defer to my colleagues. 

Chairman MANZULLO. Thank you. Congressman Akin? 

Mr. AKIN. Thank you, Mr. Chairman. A couple quick questions. 

First of all, in the case of the rebar, I used to work for a steel 

company, and rebar was something we didn’t have a whole lot of 

extra margin in. So if you had a choice of selling a ton of rebar or 

selling a ton of oil-tempered wire or something, you would get a lot 

more margin off the other. 

Do you think the conditions have made it a lot harder for things 

like rebar, which are sort of lower-end products? Has it made it 

particularly tight in terms of supply there? 

Mr. LOFTUS. I think it has. You are correct. The bridge steels 

that are higher in alloy content, and a higher price accordingly, 

those we are able to get, but at a greatly elevated price. But on 

some of the lower more commodity grades for guardrail or rebar, 

the shortages, availability is much more acute. 

Mr. AKIN. We used to say the test it had to pass was if you threw 

it in some water and it sank, it was okay. It was kind of basic stuff 

you———. 

Mr. LOFTUS. It was steel. 

Mr. AKIN. Yes, yes. Where the alloy things and all are a lot fancier materials. So you do have that sort of effect that the more expensive products, you can get them. The price is high. But some 

of them you just literally can’t get. 

Mr. LOFTUS. That is correct. 

Mr. AKIN. Then a question relative to the mining side of things. 

I have been trying to get at the same thing that the Chairman has 

been working on. And what are the things that make our industry 

less competitive in this country? I have had a chance to ask that 

question to a lot of different people. What are the highest-price—

in other words, the reason you shift businesses overseas is because 

it is cheaper over there. It is quite simple. So what is it that makes 

us less competitive? 

Now, the answer that I have gotten back from most people is the 

high cost of health care probably hurts us, in terms of being competitive in America, more than taxes or any other policy. Is there 

20

anybody here that would say that health care is not the number 

one cost-driver? 

You made reference, Constance, to some policies relative to mining. Are there federal policies which tend to close down mines more 

than just the cost of health care? Or are there other things that 

are major cost factors here? 

Ms. HOLMES. Our companies face exactly the same types of cost 

structures, as far as concerning employee health benefits, et cetera, 

that any other company in the United States faces. And it is a tremendous, tremendous problem that must be dealt with, both in the 

short and the long term. 

We also have other cost issues related to bonding for the mining 

that we must do, the bonds that we must obtain and that are much 

more difficult now to obtain. But we are also facing some real problems in making certain that we have the resources available so 

that we can maintain current production levels, as well as try to 

expand those production levels. And that goes back to some of the 

extremely long times and expensive times that we are experiencing 

in permitting. 

But day-to-day operations, certainly health care costs are a big 

factor. 

Mr. AKIN. So if you had to rate all of those things, you had to 

pick, if you could fix one of them, what would be the best one to 

fix? 

Ms. HOLMES. Clearly, you have to address all of them in concert. 

Mr. AKIN. That is nice. You ought to run for office, you know. 

[Laughter.] 

Ms. HOLMES. But, in the short term, clearly you are talking 

about some operating costs, amongst which health care costs are 

very important. But in the medium to long term, and obviously it 

affects the short-term capability as well, our companies are putting 

the issues with permitting as the number one top issue for them. 

Mr. AKIN. Is that for iron ore mining? 

Ms. HOLMES. It would be for just about all types of metals and 

minerals mining in the United States, yes. 

Mr. AKIN. Permitting. And the government has to give you a permit before you can open a new mine? 

Ms. HOLMES. Many of the mines and most of the resources are 

located on federal lands. And so clearly, the permitting process that 

you must go through to obtain access to those resources and then 

go on must be, it is a federal, state, and local government activity, 

yes. 

Iron ore, I will have to supply an answer specific to iron ore for 

the record. 

Mr. AKIN. Okay. You might be encouraged to know at least the 

House has passed at least four versions of putting a cap on medical 

punitive damages. We have had a little trouble with the other 

body, but we have passed it about four times over here. We recognize that is a problem, and we are trying to get at at least part 

of that situation. 

Thank you very much, Mr. Chairman. 

Chairman MANZULLO. Congressman Bradley. 

21

Mr. BRADLEY. Thank you very much, Mr. Chairman. I apologize 

for being late. I had a number of New Hampshire constituents in 

my office, so they had to come first. 

The question I had, and perhaps it was already addressed by the 

panel, and if so I apologize. But what are the possibilities of United 

States companies being able to ramp up steel production, in particular? Or have we lost so much of the base of this industry over 

the last several years due to economic conditions and other things, 

that it just is unlikely that this industry can be a growth industry 

in our country? 

And if the answer to the question is we could grow again, what 

are the types of regulatory policy changes that would enhance the 

ability to produce these basic materials in our country? 

Mr. LOFTUS. With all due respect, sir, I think we have got the 

wrong panel here to answer that question. You really need the 

steel supplier. 

Ironically, in the plate market, which is what we use primarily 

in bridges, there is adequate capacity to produce steel. But the 

shortages of both scrap for the mini-mills and coke at the moment 

for the integrated mills to produce raw steel is lacking. So the capacity is there, but the availability of the raw materials is not adequate at this time. 

What the solution to that would be is beyond my area of expertise. Whether there would be changes in the environmental regulations for coke production, for instance, might make a big difference. 

But I don’t feel qualified to answer that. 

Chairman MANZULLO. Jim, would you yield? 

Mr. BRADLEY. Yes. 

Chairman MANZULLO. Wilbur Ross, the President of ISG, when 

he testified here about three weeks ago, said that his company is 

ramping up to increase steel production of I think 750,000 tons. 

Was that per year? So that partially answers the question. 

Mr. BRADLEY. Okay, thank you. I have nothing further. 

Chairman MANZULLO. Let me ask a question here. We all know 

the long-term things that have to be done in order to help out the 

cost of doing business in this country. Those are a luxury at this 

point. 

If you had it within your power to do something within the next 

30 to 60 days, one or two things that would dramatically impact 

your industry, what would it be? 

And Ms. Holmes, if you want to—you know, the reason we pick 

on you is because you are mining, and everything starts with you. 

So we look to you for the most basic of answers, and can’t go very 

well without you. 

Ms. HOLMES. Well, let me see. In the next 30 to 60 days, it is 

extremely difficult. But I will say that affecting the basic mining 

industry and our costs, just as will affect all costs here—and it is 

not quite on the subject of the panel, I understand. But high costs 

of doing business, of course, affect our profitability. 

The thing that can probably help the country the most is to pass 

an energy bill. I mean, because while everyone is faced with very, 

very high costs of raw materials, and we are all faced with the vagaries of the world’s supply markets and the ups and downs of 

price levels, at the same time that companies are experiencing 

22

these high metals and raw material costs, we are also experiencing 

extremely high costs for energy. And anything we can do to bring 

those down, through passage of a sound energy bill, which I know 

has been done on the House side and we are still waiting, is an 

important thing to do, along with all of the other things that my 

colleagues might suggest. 

Chairman MANZULLO. Mr. Cowan? 

Mr. COWAN. Well, I know what I would do instantly, because 

there is no such thing as instantly. 

But we are more concerned about jobs that are leaving. I think 

I heard the same thing from the copper people. I think what happens is that, the little job people supply to bigger customers. Their 

big customer, without mentioning any automotive name by name, 

go to every supplier and say you must reduce your costs. 

Chairman MANZULLO. Hey, look, General Motors just announced, 

and I will say it, that they are going to increase by tenfold the 

amount of outsourcing that they are going to do, requiring their T–

1 customers to import stuff from China. 

Mr. COWAN. Absolutely. 

Chairman MANZULLO. And somebody is going to have to wake up 

to the fact in this country, that the job is going to be so poor-paying, there won’t be anybody left here to buy their cars. 

Mr. COWAN. Let me bring a point———. 

Chairman MANZULLO. Let me finish, and then I will give you as 

much time as you want. 

When the Japanese come to this country and set up shop, Nissan 

and Toyota, what we have seen is that they are insisting on buying 

more and more American materials to put in their automobiles, 

and the American manufacturers are putting in more and more 

Chinese stuff. And the Japanese want to do that for several reasons. 

Number one, they are thinking long range. They want to make 

sure that the people are here in this country for the jobs to buy 

their cars. And second of all, they want to be able to meet the 

NAFTA requirements of 62–1/2 percent U.S. content. 

What we find in Rockford, which I still consider to be the fastener industry, used to be the fastener capital of the world, we 

have lost so many fastener shops it is incredible. But it is the Japanese automobile manufacturers in this country that are putting to 

shame many of the U.S. manufacturers by insisting on high quality, faster made, in this country. 

We have people contacting us all the time on why are the big 

three sending us all kinds of directives saying, by the way, what 

portion of what you supply us is coming from China. And by the 

way, you can save a lot of money when we put these cost restraints 

on you by buying the stuff from China. I guess that is a little bit 

of an editorial, but that goes to explain why the people in my biggest city, Rockford, Illinois, has 11–1/2 percent unemployment. 

I guess I will ask you the question all over again, Ed, without 

the clock on. 

Mr. COWAN. You just gave my answer, and that is great. Because 

what I really see in this thing—and I will use the name GM—the 

buyer doesn’t care if there are some subsidies given by the Chinese 

23

Government on a casting coming over. He just wants to know what 

your price is. And everything is based on price. 

I mean, if they would recognize that a subsidized casting price 

is not going to be there forever, it is going to go away, but once 

we lose that job we have lost it forever, maybe people would think 

a little bit differently. 

But I don’t know how you identify that number, what it is, how 

much it is, and what the penalty is. But the pressure is on. The 

little guy isn’t moving his jobs to China; he is moving the jobs to 

China under pressure from the big guys. Everybody should know 

that. 

Chairman MANZULLO. This is why Congressman English’s bill 

that would reverse the 1974 law in this country to allow countervailing duties against the Chinese, based upon the Chinese subsidizing their industries, is extremely important. 

So let me give you your answer. And that would be to enact Phil 

English’s bill that would allow those actions to take place immediately. 

Now, who is here from Pennsylvania? Pat, you are here from 

Pennsylvania. 

Mr. COWAN. We have a plant in Pennsylvania, also. Lebanon, 

Pennsylvania. 

Chairman MANZULLO. You are in Lebanon, Pennsylvania. Who is 

the Member there, do you know? 

Mr. COWAN. No, I do not. I live in Cleveland. 

Chairman MANZULLO. Okay. 

Mr. COWAN. But there is one comment. I mean, I have seen aluminum jobs go to China that, I am pretty good at math, if aluminum is 80 cents a pound and it is a five-pound casting, you have 

got four dollars worth of aluminum. And you can’t sell it for $4.20. 

There is something else going on that somebody has to identify. 

Chairman MANZULLO. That is why, if you look at our opening 

statement, we put the list of the possible recommendations. We are 

going to be presenting those to the International Trade Administration within the Department of Commerce as soon as this hearing 

ends. And we will continue those discussions with them. 

Mr. Rupp. 

Mr. RUPP. Congressman. Short term what we believe needs to 

happen is exactly what my colleague has just talked about. We believe that the subsidies that are coming from, particularly from 

China, that the Administration needs to undertake a WTO dispute 

settlement case against them for illegal subsidies. 

We have got the exact same issue going on. And that is what is 

fueling the scrap that has basically doubled the scrap that is being 

exported out of this country. 

Ultimately it is impact on jobs. My company, for example, shut 

down a facility in Indianapolis, Indiana last year, where we used 

to employ 800 people, because of the inabilities to be able to compete. In our industry that I represent, we have another company 

that shut down a facility in Paramount, California last year, another company that is just trying to come out of Chapter 11 and 

trying to survive. 

For us in the short term, we believe that some help in stopping 

the rapid export of our material out of this country, such that we 

24

could—it is copper-based scrap, Congressman, copper-based scrap. 

We believe some short supply issue could assist us in trying to stop 

this rapid escalation of material out of here until we can get our 

feet on the ground. 

We also believe that the exchange rate on the yuan is not a 

short-term solution, but a longer-term solution that would be helpful to us. But the most significant issue we believe is that there are 

subsidies that are going on that need to be attacked. 

What is happening is our material, we can’t—if you are Chinese 

and you want to buy a pound of material, you can get subsidized. 

I can never match you on price. And so what happens is the material leaves this country, and starts the whole escalating effect. And 

that is why the price of copper at 70 cents a pound, when it goes 

to $1.40 a pound, it is a problem. 

I have been in the industry for 30 years. The penny got changed 

in 1980 because the price of copper was $1.40. The penny used to 

be made of 95 percent copper, 5 percent zinc. It is now made out 

of zinc and copper-plated, because the government couldn’t afford 

to spend that kind of money to make a penny. 

So what has happened is we can’t stand for the prices to stay up 

at these levels that they are staying. And what will happen is, as 

China continues to be subsidized, what will continue to occur is we 

will lose our customer base, ultimately our business, and ultimately jobs. And it has happened, I mean, in the rod side of our 

business it has happened dramatically in the screw machine shops 

right now. 

Chairman MANZULLO. John? 

Mr. LINDSTEDT. Congressman, in the short term, I think the biggest impact that would help manufacturing is energy costs. And it 

ties in with the regulatory issue. 

Part of the reason we have such high energy costs in this country 

is, that it take 10 years to permit a power-generating facility. Currently the EPA is looking at more air regulations on the discharges 

from facilities that are going to raise the cost of our energy. And 

it ties into, I guess, a longer ethical question. 

We live in a society where we have demanded clean air, clean 

water, wonderful health care, et cetera, et cetera. And then for 

some reason, we put on moral blinders, and we send this work 

overseas in the guise of cost. 

I invite you to look at the current March, 2004 National Geographic article on China. And if I hear one more time that we have 

fair trade and they have the same environmental regulations we 

do, I want to get sick. Look at that article. Look at the costs imposed on the people of China for cost. It is morally wrong, what is 

happening in this country. 

And the only person I have heard speak to it in this current political campaign is Senator Edwards from North Carolina. He made 

a very strong statement about that, and it really played in the 

heartland of the U.S. Look at the results of the Wisconsin primary 

elections. 

We have to wake up. We can’t speak out of both sides of our 

mouth. And the price pressures from up above are unbelievable. I 

mean, it is price, price, price. 

Chairman MANZULLO. Charlotte? 

25

Ms. VINCER. I completely agree with John here about trade policies not being too fair. 

Yes, we are a small company, and we are pressed upon by our 

big customers to have price reductions continually. And that is just 

so tough. It is just so hard on us. And there are so many other companies that are going through the same thing. 

Again, health care is a big issue. For my little company, the sad 

part is we all had to let it go, and let our spouses take us on. We 

did that years ago. We haven’t been able to afford health care 

since. 

Chairman MANZULLO. That means you can’t grow. 

Ms. VINCER. Thank you. We have had one employee, and laid her 

off, eight months ago or so. Actually, longer than that. But we 

couldn’t keep her. 

Another sad part is my father had to go, who is a partner in the 

company, and find another job that had better health care. 

There is a lot of issues. I don’t, again, I am just a small person 

in this big-potato world, however. And I would just like to say I appreciate everybody at this panel has had very, very good points. 

And I am thankful that you invited me. 

I would just ask that we would please get to a resolution as 

quick as possible. 

Thank you. 

Chairman MANZULLO. Patrick? 

Mr. LOFTUS. I would have two suggestions in the short term. 

Both are very specific, and both are very urgent. 

The first would be to pass an adequately-funded highway bill. 

The TNI Committee I know has been working on that, and what 

we really need is a good, strong six-year bill that will adequately 

support highway funding out into the future, so the states know 

what they are going to have to deal with. What we have experienced in the last year is uncertainty on their part as to what will 

the funding levels be, so they have not let some of the longer-term 

major projects, and it has severely hurt the industry. 

So we need a new bill, and we need it adequately funded, and 

we need it now. 

The second thing is even more specific. I would ask you to encourage Secretary Mineta and Administrator Mary Peters of the 

Federal Highway to put in and allow and encourage a short-term, 

limited-duration, emergency escalation clause for existing contracts 

in steel construction. Absent that, we will see more headlines like 

this one about steel crisis and bankruptcies. 

This week one of the best fabricators in this country, Haven 

Steel, declared bankruptcy. They could not make their payroll; they 

sent their people home. That is very unusual. But they were completely out of cash because their lending institutions would not 

allow them to continue. They were paying more for their steel raw 

material than they were being paid for it after fabrication. 

Now, that is in a building, it is not a bridge. But that same condition is right around the corner. And this is time-sensitive critical 

that we need escalation on existing contracts, or you are going to 

see other defaults, other bankruptcies, and construction brought to 

a screeching halt. And we need that help now. 

26

So we would ask you to please contact Secretary Mineta and 

Mary Peters, and ask them to adopt this policy. 

Chairman MANZULLO. Congresswoman Napolitano. 

Ms. NAPOLITANO. Thank you, Mr. Chair. And again, I just can’t 

tell you how important that is to my area. 

I was interested in the dialogue over sludge, over the possibility 

of utilizing the minerals that, what was it you indicated was not 

being recouped? 

Mr. LINDSTEDT. Yes, ma’am. In my industry we deposit metal on 

other metals, and there is some of that metal in an aqueous solution in our rinse stream which we extract from our processes, 

under the requirements of the Clean Water Act. 

The metals are many in that stream. The most common ones are 

copper, nickel, chromium, tin, and zinc. And under the existing 

hazardous waste requirements in the country, they are defined, 

they are listed as a hazardous waste. Whether they chemically are 

or not. And that was based on a set of prerequisites that the 

USEPA looked at back in 1980. And the data that they were looking at was data that was gathered from our industry, most of it 

pre–1950, when it was a very different world. 

So they decided that that product was a listed hazardous waste. 

Someone decided it is hazardous. And we are now required to take 

this product, encapsulate it in concrete, and bury it in the ground. 

This product, most metals in there are somewhere between 3 to 6 

percent by weight, on a dry-weight basis. 

Now, if you were in the mining industry and I said I had a mine 

that had 3-percent copper by weight, they would be rushing to that 

site to take it. And every day we throw it away. Thousands and 

thousands of pounds. 

We have been working with the agency for over 10 years to show 

to them that over 50 percent of the product that comes out of my 

industry is not a hazard by their chemical definition. In other 

words, if we laid it on the table here, there is nothing in that product, if it didn’t come from my industry, that would make it a hazardous waste. But they have defined it that way. 

And we have been encouraging them to look at that, change the 

definition, and allow the hazard listing to leave. If the hazard listing leaves, we can send it to multiple facilities within the United 

States that are currently not permitted to handle a hazardous 

waste, and they can recycle it. 

We are desperately trying to get them to recycle that material. 

I mean, often the public thinks that we do a wonderful job of recycling in this country, and honestly, we do a pitifully poor job. It 

kind of makes you feel good when you recycle a milk carton. But 

when we throw away millions of dollars of metals that would have 

some impact, it is rather disappointing. 

And the process takes so long. If they passed that law today, it 

would take another four or five years, under the current regulatory 

regime, to make that effective, where we could actually change it. 

And we talked about permitting. It is absolutely bizarre. It makes 

no sense. Why 10 years to permit a power plant? Why five years, 

when we are crying about metal prices, and we are encapsulating 

in concrete, and we put it in the ground, must we wait another five 

years to get at it? 

27

I don’t know. I mean, it is a strange set of circumstances driven 

by a lot of agendas on the environmental side. And we are not talking to take a hazardous waste and us it; we are talking about a 

non-hazardous product that we desperately need. 

Ms. NAPOLITANO. Thank you, Mr. Chair. I think maybe we need 

to start asking some questions of some of our agencies as to why 

this has not happened, why they have not re-reviewed how they determine it is hazardous. What data are they using. And to maybe 

force the issue and have them bring them up to date. 

Chairman MANZULLO. We appreciate that. You know, it is obvious what is going on here, is that over a period of time, with respect to the mining industry, there has been a decrease in demand 

based upon cheap foreign products coming on the market. 

Decreased demand means that the mining operations have decreased proportionately, and that when the increased demand 

comes along, because some of the mines have shut down or some 

have scaled back, then for them to gear up it takes a tremendous 

amount of time for that to take place. 

Having all these hearings on manufacturing, we have been doing 

it because somebody has to focus on this industry. This is a thousand-piece puzzle, the whole issue of the restoration or maintenance of manufacturing in this country 

Connie, when mining increases, that is a lot for Caterpillar. We 

have a $101 million Caterpillar presence in our Congressional District, in the Speaker’s district, just below us, and obviously Ray 

LaHood’s district. And so one fuels the other, and those are tremendous, high-paying jobs. 

And in the midst of all of this, we have all these regulations that 

are so disjointed. 

The good news is that Dr. John Graham, who is the head of the 

Office of Regulatory Information, within the Office of Management 

and Budget, put out a press release just about a month ago, whereby his office is undertaking a study of every regulation that supplies to manufacturing. It is a mammoth study. And Dr. Graham 

is a good guy. Really devoted, he has got a great mind, the ability 

to analyze a lot of things going on at any given time. And his job 

there, and his goal—and he did this on his own, of course along 

with the President’s push on it—is to try to harmonize the numerous regulations that impact businesses, oftentimes not only with 

multiple permits, but different requirements. If you satisfy one 

agency, you break the regulations of another agency. 

You have been tremendous witnesses. You spoke from your 

hearts. Your recommendations, along with the recommendations 

that we have set forth in our opening statement, as I said before, 

not only are they up for the press that it is here, and a lot of industry press is here who are very much interested in this; but also 

within the International Trade Administration of the Department 

of Commerce itself. 

We want to thank you for coming here, and this hearing is adjourned. 

[Whereupon, at 11:02 a.m., the Committee was adjourned.]

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