Final Thoughts

Final Thoughts
Written by John Packard
March 9, 2016
SMU sources have advised us that there were two vessels of pig iron sold out of Brazil to the United States at $200 per metric ton NOLA. This represents a $12 per ton increase over last sales ($188 per metric ton). Shipment of the pig iron is anticipated for April/May out of Brazil.
Fifteen years ago (2001) China was allowed to join the World Trade Organization (WTO). According to the World Steel Association (WSA) China produced 151,634,000 metric tons (167,148,000 net tons) of steel in 2001. That same year the United States produced 90,102,000 metric tons (99,320,000 net tons). I am checking with my sources but I believe China exports of steel in 2001 were negligible.
Let’s move to 2014, the last year the WSA website has updated production tonnage. In 2014 China produced 822,698,000 metric tons (906,868,000 net tons) of which 93,780,000 metric tons were exported (103,375,000 net tons). In 2015 that export tonnage rose to 112,400,000 metric tons or 16.6 percent (123,900,000 net tons) while steel production was reported by CISA to have dropped by 5.4 percent.
In both 2014 and 2015 China exported more steel than the US produced in 2001.
When we take US production for 2014 at 88,174,000 metric tons or 97,195,000 net tons (according to WSA figures) that is lower than 2001 and less than what China has been exporting.
So, what the domestic steel industry has been complaining about is in order to maintain high employment (or grow employment) China has over-built its steel industry – most of which is government funded and supported – and besides exporting steel to the U.S. and the rest of the world they are taking jobs here in the U.S. and the rest of the world. You will see reports in the news with much of the political debate centered on trade about China and the advantages they received through membership in the WTO while disregarding the laws of supply and demand.
The next fight will be over whether China should be recognized as a market economy. You may want to listen to the presidential candidates to see where they lean on that one… Assuming, of course, that the Republicans get around to discussing policy as opposed to body parts at some point in time….
As always your business is truly appreciated by all of us here at Steel Market Update.
John Packard, Publisher

John Packard
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