This article first appeared in the St. Louis Beacon, Feb. 3, 2011 - WASHINGTON - It may be a relatively light metal, but magnesium has suddenly become a heavyweight issue at the U.S. International Trade Commission.
The ITC's vote next week on whether to continue "antidumping" duties against imports of the metal could have a major impact on die-casting companies in Missouri and Illinois that use magnesium -- and the more than 2,000 workers they employ.
Those firms, including St. Louis-based Spartan Light Metal Products Inc., contend that the U.S. Commerce Department's decision in 2005 to impose the duties on imports of magnesium from Russia and magnesium alloy imports from China and Russia drove up the domestic price of magnesium and left them at disadvantage against foreign competitors.
"It really hurt us," said Michael Sparks, Spartan's vice president of operations. "There's been about a 40 percent disadvantage for us on pricing" since the tariffs were imposed over competing die-cast companies in Canada and Europe that buy cheaper magnesium.
Spartan produces magnesium and aluminum die-cast products for the automotive industry and hand-held power tools at three plants -- in Sparta, Ill., Mexico, Mo., and Hannibal, Mo. -- that employ a total of 684 workers, some of whom may have to be laid off if the current trends continue.
Nationwide, the North American Die Casters Association says that about 1,875 direct jobs and an estimated 8,000 support jobs for the industry have been lost since the antidumping orders took effect in 2005.
"We need this tariff to go away," said Don Hays, general manager of Continental Casting LLC, a die-cast manufacturer that employs 170 workers at three plants, including about 65 workers at its main magnesium die-casting plant in Palmyra, Mo., near Hannibal. He told the Beacon that "the magnesium price started rising in this country at about the same time that this tariff was put on. It gave the advantage to our competitors in Canada or offshore that didn't have to pay the tariff."
If the ITC does not vote to renew them, the magnesium tariffs would expire this year under a sunset provision of the antidumping law. And a bipartisan group of legislators representing Missouri and Illinois have entered the fray by warning the ITC that renewing the tariffs might further worsen joblessness in the two states.
"The decisions made in this matter will significantly impact employment in Missouri and Illinois in a sector that provides high quality work and benefits," Missouri's two U.S. senators - Democrat Claire McCaskill and Republican Roy Blunt - and most of the state's U.S. House members wrote in a letter sent this week to the ITC's chairman, Deanna Tanner Okun.
Sen. Mark Kirk, R-Ill., also signed that letter, and Sen. Dick Durbin, D-Ill., sent a similar letter last week complaining that the antidumping duties "coupled with the limited supply and high price of domestically-produced magnesium is driving our nation's die cast industry out of business."
High-powered opposition
But the effort to convince the ITC to drop the antidumping duties faces stiff opposition from the nation's sole magnesium producer, Utah-based U.S. Magnesium LLC, and the union that represents its employees. At an ITC hearing on the case on Dec. 7, the company sent three key officers to testify, as well as a high-powered attorney, two consultants, two officers of an allied company and the head of the union local that represents about 360 workers at the magnesium plant.
"We have survived because these orders were imposed and have been enforced," testified Mike Legge, the president of U.S. Magnesium. "Over the past 20 years, low-priced import competition has put out of business every other producer of primary magnesium in North America, western Europe and India."
The company's marketing director, Susan Slade -- a native Missourian -- disputed the die cast manufacturers' contention that the main reason for their problems has been the rise in magnesium prices related to the antidumping duties. Noting that three Canadian die-casting companies had gone out of business even though they were unaffected by the tariff, Slade argued that "access to dumped magnesium imports has not been the key to die-casting success or failure in either the U.S. or Canada."
But Spartan's Sparks, testifying at the same hearing, rebuffed those arguments.
Due to the 40 percent cost disadvantage on magnesium, he said, "we initially lost our export business to foreign competitors and material substitution. We're now losing our domestic business ...." While magnesium die cast products accounted for nearly a quarter of Spartan's products in 2004, he said, that number is now down to a mere 12 percent of its business, and "by 2015, we forecast it to be 5 percent or less."
Sparks and Hays told the Beacon that, when it comes to magnesium, the federal government's right hand doesn't seem to know what its left hand is doing. On one hand, the antidumping duties raise the cost of magnesium alloys to tool-and-die makers; on the other, the government wants automakers to produce lighter, fuel-efficient cars and trucks by using more die-cast magnesium, which has about two-thirds the weight of aluminum.
For the members of Congress, the bottom line is jobs in Missouri, Illinois and other states where die-cast manufacturers are based. "In one small area in rural Missouri there are over 1,000 jobs associated with companies that use magnesium," McCaskill testified at last month's ITC hearing. "Their inability to compete with the price of magnesium internationally is causing these jobs to dry up, and that has a devastating impact on these communities."
In their letter this week to the ITC, the Missouri legislators and Kirk wrote that magnesium die casters employ more than 1,000 people in Missouri and 1,100 workers in Illinois. "In small towns, the loss of one major employer can have a devastating effect," they wrote. "For instance, in 2009 a die casting plant ceased operations in Monroe County. Today the county still has the highest unemployment in northeast Missouri."
They said those plants report that they pay $2.30 per pound on average for magnesium alloy, while their Canadian and other foreign competitors pay between $1.36 and $1.50 per pound. "Since the duty was imposed, the die casters say that output of magnesium parts has fallen by half and that 19,000 jobs have been lost," the legislators wrote. "This is deeply troubling. The die casters reasonably fear that layoffs will continue if the duty is continued."
In addition to the three senators, the letter was signed by Missouri U.S. Reps. Russ Carnahan, Todd Akin, Jo Ann Emerson, Blaine Luetkemeyer, Sam Graves, Vicky Hartzler and Billy Long. (Neither Rep. William Lacy Clay, D-St. Louis, nor Rep. Emanuel Cleaver, D-Kansas City, signed it.)