Geneva Steel is making its mark on the Japanese steel industry.
According to Geneva officials, the company has exported 145,000 tons of steel in the past few months, and most of that has gone to Japan."There is no question that Japan would rather not buy from the United States, but they get a pretty good deal because of the weak dollar. It makes our steel a bargain," said Geneva President Joe Cannon. "For the Japanese business people it's a natural that we be a customer to Japan. They see that we produce a quality product over other steel industries."
Cannon said there is no guessing how long the weak dollar will last, but he believes Geneva will still have an opportunity to export to Japan because the Japanese people have seen the type of product Geneva produces.
After the Japanese received their first shipment, he said, they were so pleased that they placed more orders with the company and expressed interest in a long-term relationship with the Orem plant.
"That proves that our quality competes with Japan's," said Jack Bollow, director of public affairs at Geneva. "We are producing a fine product. That's another plus for the employees."
Quality is perhaps the only advantage Geneva Steel has in competing with the Pacific Rim steel industry. Unrestrained industry in Korea and Taiwan make it almost impossible for U.S. steel plants to be competitive in the steel exporting business, Cannon said.
"Japan is not a big threat like it used to be," he said. "By and large it is like America with good environmental controls and a good wage for workers, but we are still threatened by unfair practices, such as the low wages in Korea, Taiwan and China."
Korean steelworkers make about $1.80 an hour and in China they make only 18 cents an hour, said Carl Ramnitz, Geneva vice president of human resources. That compares to an average $21 an hour for American steelworkers.
Because of the labor rate, Korea has an advantage in the steel market of $60 a ton. China has an advantage of $70 a ton, Cannon said. Neither country has to worry about environmental costs.
At Geneva, $40 a ton goes toward environmental costs, or 10 percent of the gross price of steel per ton.
"Once an operation becomes more like a regular developed country, we can compete with them," Cannon said.
That's what has happened with Japan, but Cannon said there is still no level playing field.
Voluntary Restraint Agreements (VRAs), in effect since 1984, have restricted the amount countries export to the United States to give the domestic steel industry a chance to compete in its own homeland.
The House Steel Caucus in Washington, D.C., has been looking at whether to extend the agreements past 1989. Cannon went before the caucus in June to ask that they be extended.
"We need the VRAs," he said. "America is at the mercy of foreign competition. That's why we need to preserve domestic industry. If they have a corner on the market, they will raise prices.
"It is not accurate to conclude that because we are exporting it is not a major concern. It is still a very serious ominous threat to this plant and domestic steel in general."
Government subsidization of steel industries in various countries, which comes in a myriad of forms, allows the foreign steel industry to capture the market share, Cannon said.
In some countries, the steel plants are owned by the government or are built with government-subsidized loans that don't have to be repaid if the industry goes bad. Other countries subsidize a plant's infrastructure.
Cannon said some foreign industries sell their steel for less than it costs to make it just so they can get a market share.
"There is no question that we need protection," he said. "Some want to get into the market and they will do anything it takes. What's at stake here is that we may have to concede our industrial base to foreign competition."
Geneva Steel is the only integrated steel mill in operation west of the Mississippi. This puts "this mill on the front line of the economic war with the Pacific Rim," he said.
"The mill was built during World War II in Utah to be beyond the range of Japanese bombers. We are now threatened more subtly but no less dangerously by the threat of unrestrained Pacific Rim steel imports."