PITTSBURGH—Western Pennsylvania, where much of the country’s heavy industry has its roots, was ground zero for an alleged hacking scheme by the Chinese military.
In 2010, almost 30 employees of U.S. Steel Corp. X -0.16% received emails from the alleged hackers, many appearing to be from then-Chief Executive John Surma. Some contained the subject line “US Steel Industry Outlook.”
Instead, the emails were sent by Sun Kailiang, a hacker affiliated with the Chinese military, according to a federal indictment disclosed Monday. The emails allegedly were designed to extract sensitive information from U.S. Steel employees during a trade dispute over imports of steel pipes and tubes for the U.S. oil and gas industry, one of the company’s two key markets and among the most lucrative customers in the global steel industry. U.S. Steel had no comment.
The hackers also allegedly targeted the Pittsburgh-based United Steelworkers union, which participates in trade disputes involving imported Chinese goods, as well as three other Pittsburgh-area industrial companies: Alcoa Inc., AA +0.45% Westinghouse Electric Co. and Allegheny Technologies Inc. ATI +1.15% The indictment says that “in some cases, the conspirators stole trade secrets that would have been particularly beneficial to Chinese companies at the time they were stolen.”
Mr. Sun, whom the indictment said also went by the name Jack Sun, and four other individuals associated with the Chinese military were charged in the case.
“We have pre-eminence in metals, and we have other important industries such as nuclear power and we are the home of organized labor,” David Hickton, the U.S. attorney behind the case, said about Pittsburgh in an interview. “And we are a target of cyber hacking.”
Chinese officials denied the allegations.
Although the alleged hacking exposed vulnerabilities in U.S. Steel’s security systems, the case could boost efforts by the company and industry to gain new tariffs on imports.
Since the start of 2013, U.S.-based steelmakers, led by U.S. Steel, have filed 40 trade complaints with the U.S. government, including seven against China, the most intense period of trade litigation since 2001, when the Bush administration imposed tariffs on many steel products. U.S. trade officials are set to rule on a dozen of the petitions this summer amid a fight over market share fed by an oversupply of steel world-wide.
“There’s an enormous amount of fraud by Chinese companies” in trade disputes that hacking could have enabled, said Michael Coursey, a trade lawyer with Kelley Drye & Warren LLP who represents specialty-metals producer Allegheny Technologies.
An hour after the indictment was announced Monday, U.S. Steel and the United Steelworkers hosted a rally urging new import tariffs on foreign steel. U.S. Rep. Mike Doyle (D., Pa.) told the gathering that, in light of the alleged hacking, “China picked a fight with the wrong city.”
Sen. Bob Casey (D., Pa.) in a statement urged the Obama administration to take aggressive action, saying China’s anticompetitive trade practices have taken a dramatic toll on Pennsylvania businesses.
The indictment says the emails allegedly sent by “John Surma” allowed Mr. Sun to “steal host names and descriptions for more than 1,700 U.S. Steel computers” as well as data related to “applications for U.S. Steel employees’ mobile devices, and physical access to U.S. Steel’s facilities” in western Pennsylvania.
Also, on at least four occasions between 2010 and 2012, hackers “gained unauthorized access to [United Steelworkers] computers and stole email messages and attachments from the accounts of six to eight USW employees who would be expected to have sensitive, nonpublic and deliberative information about USW’s trade strategy concerning China,” the indictment says. “Each theft targeted messages from a narrow window of time before the intrusion.”
Union spokesman Wayne Ranick said the allegations “are quite troubling and we are taking the matter very seriously.” In an interview last week, United Steelworkers President Leo Gerard said China “chooses to most of the time not play by the rules.”
Mr. Gerard met with lawyers Monday to discuss the alleged hacking, said a union official. “We think it’s pretty ludicrous the Chinese government is bothering to spy on us,” the official said. “We don’t have any secrets, we just think trade laws should be enforced fairly.”
China’s steel exports rose to 7.54 million tons in April, the highest monthly level since August 2008, shortly before the global financial crisis. China’s steel exports totaled 62.3 million tons last year, just short of an annual record set in 2007.