Final Thoughts

Final Thoughts

Written by John Packard

The laws of unintended consequences concern me. President Trump’s Section 232 steel and aluminum tariffs, as well as Section 301 tariffs, are only beginning to have an impact on the consumer. It is only a matter of time before consumers have to react as they do not have unlimited cash flow to pay higher prices for products.

I will give you are real-life example that happened to me on Thursday of this past week. I had an issue with my oven, which has a culinary center. I was having problems with the face of the unit recognizing the touch-screen power button (remember when ovens had knobs that might fall off but little else could go wrong?). Since I am cooking the feast for Thanksgiving, I thought it might be a good idea to resolve the issue. The repairman told me I need to replace the face of the unit, which also contains the software and other computer related “stuff.” When checking the producing company’s website, the parts were listed as being “out of stock.” My belief is the parts were made in China and affected by one of the Section 301 issues and no replacement supply is available. I was able to jerry-rig a solution as there is no option (other than buying a brand-new oven, which is not an option in my house).

The Associated General Contractors of America (AGC) is reporting that higher costs for materials is impacting construction and new construction projects. “Contractors and subcontractors raised their bid prices in November to make up for past cost increases, but the cost of goods and services that they buy rose even faster,” said the association’s chief economist, Ken Simonson. “That makes further bid-price increases likely, but also implies some contractors will just stop bidding on projects where costs are too unpredictable to ensure they can be built profitably.”

I personally support the efforts being made by the Trump administration to rein in a Chinese government that has taken advantage of the opening of trade with the United States over the past 40 years. In a conversation with a large service center CEO on Friday, he described competing with China like watching an 11 on 8 football game. The team with only 8 players on the field has no chance at winning. China has not done a good enough job of building their own economy and allowing for wages that increase domestic consumption. This distributor CEO told me that it is hard for the Chinese to come to the negotiating table knowing they must give up a lot right up front. In the meantime, he told me there are four escalators at Cleveland Hopkins that haven’t been running or repaired for some time now. Another sign of unintended consequences?

CRU believes trade tensions and tariffs will continue into 2019, and I am also of the opinion that the Trump administration is not inclined to back down or back off. Get ready for a roller-coaster ride… Another reason to block out Aug. 26-28, 2019, on your business calendars. These are the dates of the 2019 SMU Steel Summit Conference.

SMU is making significant changes/improvements to our service center inventories analysis. I want to personally thank the service centers who are working with us as we expand our look and depth of the data being collected. We are going to be providing the data to just the participating service centers for the next couple of months. As we move into 2019, the amount of information we will share with the public will be limited to just a general outlook. Our “Flash” report will only be given to data providers (we do not charge for those who want to be a data provider – and we are open to signing a non-disclosure agreement, and have several already in place). If you would like to learn more about becoming a service center/wholesaler inventories data provider, please contact either myself – or DeWayne Tuthill at 724-720-1008. DeWayne works with SMU out of the CRU headquarters in Pittsburgh.

On Monday, I will be in the Pittsburgh CRU headquarters meeting with the CEO of CRU who has flown over from London to meet with the USA team. I will return to my office on Tuesday afternoon. If you need information about Steel Market Update, please contact Paige Mayhair at 724-720-1012 or Brett Linton at

As always, your business is truly appreciated by all of us at Steel Market Update.

John Packard, President & CEO

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