German Curá, President and CEO, Maverick Tube (Tenaris), Testimony

Good afternoon. I am Germán Curá, president and CEO of Maverick Tube Corporation and president of Tenaris North America. I thank you for the opportunity to appear before you today to testify about the global overcapacity crisis and the disastrous effect it is having up and down the value chain. Maverick produces welded OCTG and line pipe in its Arkansas, Tennessee, and Texas facilities. Maverick's corporate parent in Buenos Aires, Tenaris, is one of the world's largest energy pipe producers with facilities in over 16 countries. In the last nine years, Tenaris has acquired two publicly traded U.S. companies and invested over $1.8 billion in a new seamless OCTG facility in Bay City, Texas. In total, our capital investment in the U.S. is just under $8 billion.

I'm here today to address what the U.S. government can do to address the overcapacity and possible solutions. First, in my opinion, the U.S. government has to increase its scrutiny over anti-dumping and countervailing duty cases. Second, it has to continue to treat China as a non-market economy. Given that China has failed to honor its commitments, we need enforcement of the law. We need to protect true market-oriented producers from subsidized and dumped Chinese and Korean imports. Only by enforcing the law can Chinese and Korean producers be forced to reduce capacity. Otherwise, it will be done on the backs of our U.S. workers.

We made these investments in the United States in the belief that the U.S. would enforce the law. The communities where these investments are located sustain a significant amount of tax revenue and direct and indirect employment. In the U.S., the Chinese were the first to flood the market with their downstream OCTG and line pipe, nearly destroying the U.S. industry in the process. After two successful cases, imports of OCTG from China as well as line pipe could not compete at fair prices and largely exited the market. The fact is that once the playing field is leveled, they simply cannot match the quality, reliability, and value we provide our customers. But unfortunately, this relief has lived very shortly.

Facing their own flood of Chinese flat-rolled steel products, Korean pipe producers, with the help of their flat-rolled partners, saw an opportunity and began flooding the U.S. market with their own excess steel. When it comes to steelmaking, Korea has no inherent comparative advantage over the United States. Korea has little to no iron ore resources, it imports virtually all of its fuel sources to generate electricity, Korean demand for steel products is weak, and while labor costs may be lower than in the United States, labor makes up a relatively small proportion of the total pipe production cost, and U.S. workers are far more productive on a per-ton basis than their Korean counterparts.

Korean hot-rolled coil producers use strategic alliances, as they call it, to sequester already too-large steel capacity into value-added downstream products like welded OCTG and line pipe. The Korean OCTG and line pipe industries are nothing more than a subsidized export platform that, with the help of questionable accounting practices, are designed to push massive volumes of unfairly traded hot-rolled coils into the United States in the shape of pipe. Because the United States is the largest onshore energy market, and with virtually no market in Korea, these pipes were targeted directly at the United States.

In 2014, when drilling activity picked up, the Koreans shipped over 2.1 million metric tons of welded OCTG and line pipe combined. This was more than double the total tonnage of Korean hot-rolled coil imports in the same year. Clearly, the Koreans have used OCTG and line pipe as vehicles to dump their unfairly traded hot-rolled into the U.S. market. In two separate investigations, prior to the amendment of the trade laws, the ITC found that these imports caused material injury. Yet, despite subject to 10–15% margins, OCTG from Korea continued to surge in the United States, further devastating the U.S. industry.

This caused a massive inventory buildup, and even if drilling activity were to increase tomorrow, these unfairly traded imports will continue to injure the U.S. industry as inventories are worked off. In the current environment, most U.S. production of line pipe and OCTG is at a virtual standstill. Now we're hopeful that with the amendments to the trade law and throughout the investigation in the administrative review, these margins will increase significantly.

The only way to fully address the Chinese and Korean excess capacity is to address the full extent of the Chinese and Korean dumping and subsidies, to force these countries to address their capacity problems. We believe that only long-term relief afforded by dumping and subsidy cases will provide the structural imperative to seek global long-term solutions. The more short-term initiatives cannot seem to provide. Thank you.