The debate about China and what to do about Chinese over-capacity rages in both Asia and the United States. We received the following note from one of our main Asian trading sources who gave us the Asian point of view about the markets in Asia, dumping suits, market economy and the shutting down of excess capacity:
“Have been silent last few months as market in total chaos and frankly speaking, no one having any idea when the waters would calm. Fortunately, we now know that a big correction is coming in June. We have seen prices plummet over the past few weeks, and then slightly rebound, but that was only due to domestic traders taking advantage of this round of decreases at the bottom. The next big adjustment will be in June, next month.
The idle mills have been back in production now for 2-3 months and financially supported by new investors. They are back on line to take advantage of this most recent round of price hikes, mostly Billets, Slabs and HRC/CRC and some GI.
Take a look at the attachment on Baosteel [Moody’s downgrade to Baa1 from A3 due to weakening operating performance, oversupply, low steel prices and substantial losses at two of its steel subsidiaries] you can get some idea of the “Pain” within China as well as the affects of worldwide dumping against Chinese Integrated Mills. This is Baosteel we are seeing and if they are having such downgrades, so are WISCO, ANGANG etc..
As for China’s promise to axe 150 Million MTS of Steel, well that is not something one institute or governing body can control John. The Government is allowing the markets to run the course to see where any excess capacity can be cut. Riding the wave so to say… Since the US Mills came out strongly against any Market Economy status being given to China and the most recent Dumping actions and accusations against Baosteel on patent infringements on CRC, the Government has thrown in the towel on the USA, but playing footsy with the EU to acquire the status.
Personally John, I can only sympathize with the US Importers that Capitalism is out the door and Protectionism is here to stay. I wonder whether all of these dumping actions have caused more job losses on the import side or whether the Steel Mills have purposely axed more jobs riding on the back of the accusations.”
John PackardRead more from John Packard
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