U.S. stainless steel producers say they’re getting shafted by an embargo that prevents them from buying Cuban nickel — and by lax enforcement of that same embargo, which allows China to compete unfairly, undercutting domestic steelmakers.

For two years now, the Specialty Steel Industry of North America has asked the U.S. government to investigate potential abuses of the embargo, but to no avail.

“Nickel is one of the most important alloys in the production of stainless steel, and our industry is concerned that there is a lot of Cuban nickel in Chinese steel exports to the United States,” said attorney Laurence Lasoff of the prominent Washington law firm of Kelley Drye & Warren. Lasoff represents the
Specialty Steel Industry of North America, half of whose 10 member companies are based in Pennsylvania (see box at right).

“Over 90% of Cuba’s nickel production is ultimately exported to China,” Lasoff told CubaNews. “We believe China is getting a significant benefit by the fact it can source Cuban nickel and U.S. producers cannot. So we have this dilemma. In order to have some degree of parity here, either we enforce the embargo against Chinese imports, or it’s time to remove the embargo so that U.S. stainless steel producers are not put at a disadvantage.

Anywhere from 15% to 25% of American consumption of stainless steel is currently imported, and China consistently ranks as one of the world’s top three suppliers to the U.S. market, along with Mexico and Taiwan.

From January to August 2010, according to SSINA statistics, Mexico shipped 55.8 million kg of long and flat stainless-steel products to the United States, or 15.73% of all imported steel. In 2nd place was China, supplying 45.4 million kg, or 12.82% of the total, followed by Taiwan, Germany and Sweden.

“We are concerned. There’s a long history of our industry being highly import-sensitive,” said Lasoff, noting that China is now getting into the super-alloy market, which has a number of applications in aerospace and defense. “The embargo regulations make it explicit that not only does it extend to goods of Cuban origin, but also to materials bearing Cuban nickel,” Lasoff explained.

“In the 1980s, the U.S. banned imports of stainless steel from the Soviet Union because they refused to certify that the product did not contain Cuban nickel.”

In testimony submitted earlier this year to the House Ways & Means Committee, SSINA officials demanded to know why the Treasury Department’s Office of Foreign Assets Control (OFAC) has not pursued a more aggressive policy against Chinese companies that export stainless steel to the United States.

“Indeed, the U.S. previously entered into bilateral agreements with respect to stainless steel producers in Japan, Italy and France, to ensure that imports from those producers did not contain Cuban nickel,” said SSINA Chairman Sunil Widge, who’s also senior vice-president at Carpenter Technology in Reading, Pa. Widge complained that “a failure to enforce the embargo ... places the domestic specialty metals industry at a distinct disadvantage by allowing China to avail itself of the world’s largest nickel reserves, while simultaneously denying the U.S. industry the same access.” OFAC spokeswoman Marti Adams did not return phone calls seeking comment.