Could "Buy American" Rule Spark Trade War?

Some Businesses Fear Clause In Economic Stimulus Package Could Hurt Their Exports

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This story was first published on Feb. 15, 2009. It was updated on May 21, 2009.

Steel - the so called "backbone of America" - is suffering. The credit crisis has hit the industry hard. Steel plants across the country are hanging on until the federal stimulus package kicks in with its over $100 billion for building things like highways, bridges, and power grids, and its promise to get workers back into their hard hats.

As 60 Minutes first reported in February, the package includes a "buy American" clause that the steel industry fought hard for. It says any infrastructure project paid for with stimulus dollars must use steel made in the U.S.A., and not cheaper imports.

"The whole purpose of your stimulus package, and it's the right purpose, is to stop the bleeding of jobs and to create new jobs here in America, not overseas, not in China, not in Europe," Dan DiMicco, the CEO of Nucor, told correspondent Lesley Stahl.

Nucor is the biggest steel maker in the United States, with 18 plants all across the country, including one outside Blytheville, Ark., along the Mississippi River.

Plant manager Doug Jellison told 60 Minutes Nucor has revolutionized the way steel is made.

Instead of using expensive iron ore to make steel, Nucor uses mostly scrap - anything with steel, like crushed cars or old washing machines. "We are the largest recycler in North America," Jellison explained.

Over the last five years, Jellison's plant, like the U.S. steel industry as a whole, saw its profits soar. By mid-2008 Nucor had hit an all-time high. But then things changed, overnight.

"Just went off a cliff," DiMicco explained. "When the credit crisis hit, the water shut off. The flow of money shut off. It was like dominoes, boom-boom-boom-boom, boom-boom. I've never seen anything like this and no one else has in our lifetimes."

That was in October. Clients, from homebuilders to carmakers, simply vanished. Up until then, the plant was running on all cylinders, with tons of scrap cooking around the clock, seven days a week.

Curiously, they call the Blytheville plant a "mini mill," though there's nothing mini about it. It's a mini mill because they use a jolt from electrodes in a small furnace, instead of heating a huge one with coal.

Loud explosion-like sounds happen when electricity hits the metal. The process is run from a control room called the "pulpit." The operator raises the temperature to nearly 3,000 degrees, and pours the witches' brew - the steel - into a cauldron.

The cauldron is transported to something called a caster run out, where the molten steel is molded and cut into beams.

Mini mills can make steel more cheaply than it used to be made, more quickly and more efficiently. "We can literally start and stop our process like you flip a light switch on and off. So we can run full out and then, if the orders back off and we need to shut down, we just turn the light switch off," DiMicco explained.

And since October, that's what they've had to do. Nucor's employees watched helplessly as the number of new steel orders plummeted.

"It just kept droppin' and droppin' and droppin'," one employee said.

"One week, we actually had a negative," another explained.

The reason for that were order cancellations.

Mounds of scrap usually clear out in a week. But an apocalyptic landscape of metal has been sitting at the plant for months. Other steel companies have dealt with the slowdown by padlocking plants and sending workers home.

DiMicco told Stahl Nucor has not closed any of its plants. Instead, the plants are running at 50 percent capacity: facilities look like ghost towns, and yet, while well over 25,000 steelworkers have been laid off around the country, not a single worker at Nucor has.

"That's the big difference in us sitting here and you interviewing some other steel company. Because when we go through the gate, we don't have to worry about losing our job," one employee told Stahl.

Which isn't to say they aren't feeling the pain: with all of Nucor's plants non-union, the salaries of its more than 20,000 employees are tied to productivity, and productivity is now half.

Employees Stahl talked to told her they saw their salaries drop by about 50 percent.