Final Thoughts
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Final Thoughts
Written by John Packard
April 21, 2017
Since Thursday, when President Donald Trump signed his executive order calling for an analysis of the steel industry from a “national security” perspective, I have been swamped with emails and phone calls questioning what is going on and what do I think about the chances of something happening that will impact the amount of foreign steel coming into the United States.
My opinion is President Trump is not asking for a serious inquiry, but, rather, he wants a way to block or limit the number of tons of foreign steel coming into this country. The key question seems to be one mentioned in the White House Fact Sheet that came out when the Executive Order was signed: “Any harm caused to the economic welfare of the United States, considering the close relationship to national security.”
Harm to the economic welfare sounds to me like an excuse to exercise Presidential “rights” to protect the country. The question many have is, could the President potentially do more harm to the manufacturing segment of the economy in order to protect an industry that is the highest priced in the world?
Listen, I don’t have an answer to that question. But, you can guess that it will be a subject to be discussed from a number of angles at our 2017 SMU Steel Summit Conference in Atlanta on August 28, 29 & 30th.
I did hear from one of our speakers over the weekend who pointed out that 55 percent of the standard pipe used in the United States comes from foreign sources. I can’t image a reason why the U.S. needs to import that much standard pipe when we have plenty of production capability here.
Is the reason that U.S. hot rolled prices are so high and the world price so low because it can be produced cheaper over there (wherever that might be) and then shipped here and sold for less than hot rolled made by our own companies?
A comment about the standard pipe imports was presented to me speculating that blocked Chinese hot rolled coils are making their way to other countries and into other products and then they get exported to the United States. So, whether it is direct or through third countries, China continues to operate their excess capacity and export their problems to the United States. My gut tells me that is how President Trump sees the world.
In tonight’s issue of Steel Market Update (article above) we look at flat rolled imports and we present the import penetration percentage for each item. In the case of Galvalume, a product invented by Bethlehem Steel here in the United States (Bethlehem is now part of ArcelorMittal), imports have taken almost half of the total volume used in the United States.
The other issue, that my gut tells me the President and his Secretary of Commerce will get around to, is the number of steel products allowed to come into the United States.
On November 20, 2016 steel consultant Paul Lowrey wrote an article for Steel Market Update entitled: “Indirect Steel Trade – It’s Bigger than You Think.” You may want to go back and re-read the article. One of the premises of the article is there are millions of tons of steel missing from the market post the Great Recession. In the article Lowrey tells our readers, “Finished product steel demand in the USA peaked at 135 million tons in 2006. Last year, finished product steel demand was around 110 million tons and it will likely be lower this year [2016]. Different types of forecasting models (end-use sector activity, consumption per capita, and steel intensity of GDP) suggest that finished product steel demand should be higher – perhaps in the 115 to 120 million ton range. The growing indirect trade deficit seems to explain most of that difference.”
I expect 2017 will be a very interesting year for both the manufacturing and steel industries. Stay tuned and join us in Atlanta at the end of August…
I want to welcome the members of the Steel Framing Industry Association (SFIA). Your association made arrangements for all of you to receive access to our Premium content over the next few months. I hope you spend some time getting to know our product and services. If you have any questions please do not hesitate to ask. We can be reached at info@SteelMarketUpdate.com
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John Packard, Publisher
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John Packard
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