Analysis

Final Thoughts

Written by John Packard

October 11, 2019

One of the reasons why I enjoy the steel industry is the fact that every day is different. Each customer is unique, every buyer had his/her own personality and way of conducting business. As a salesman, my challenge was understanding and then navigating the motivating factors behind every purchasing decision.

The U.S. government has been involved with the steel industry well beyond my 42-year tenure. Fifty-seven years ago (1962) President John Kennedy went after the steel mills for raising prices by $6 per ton (not $6/cwt, $6 per ton). He pointed out that this “wholly unjustifiable and irresponsible defiance of the public interest” would mean the U.S. government would add $1 billion to the cost of defense. Interestingly, he also pointed out that higher costs would “make it more difficult for American goods to compete in foreign markets, more difficult to withstand competition from foreign imports, and thus more difficult to improve our balance of payments position….”

John Packard Summit 18At that time in history, there was movement within the U.S. Congress to pass legislation to regulate the steel industry (control prices).

The steel industry is not regulated, but it is certainly not forgotten by the U.S. government. We have countless antidumping and countervailing duty actions against foreign steel. We also have the government using Section 232 tariffs to now protect the steel industry from foreign countries in the name of national security.

The Section 232 and Section 301 tariffs appear to be bargaining chips in the U.S. government’s foreign trade policy. Whether it is right or wrong is not for me to decide; you can make your own determinations over the short-term. History will decide over the longer term.

At the 2019 SMU Steel Summit Conference, we asked attendees if they would be voting for Donald Trump, a Democrat, or a third-party candidate. They also had to option to indicate they did not know for whom they would vote yet. We had 493 responses and 53 percent of the attendees selected Donald Trump. Only 20 percent selected the Democrat (whoever it might ultimately be), while 23 percent remained uncommitted. I wonder what our attendees are thinking now…?

The world has been changing since late August. Lewis Leibowitz writes about what is happening in Washington from a trade attorney’s perspective. The bottom line from my perspective is we should continue to expect chaos in government, and the steel industry (or their customers) could well be right in the middle of it all.

I do not take a political position as far as this newsletter is concerned. I learned a long time ago that politics and business don’t mix very well… I guess the only comment I have for everyone is to keep an open mind and pay attention to your business. That is what I intend to do over the coming weeks as we try to see when and where the market will bottom, and how big a bounce we get off the bottom when it happens.

Last week I was out of the office traveling to Cincinnati for our Steel 101 workshop and then on to Minnesota. This week I will be in Pittsburgh on Wednesday and Thursday as CRU/SMU have an exhibition booth at Metalcon. Please look me up if you are attending Metalcon.

I will be in the office on Monday and Tuesday.

Paige Mayhair will be in her office as well (and attending Metalcon with me later in the week). If you have questions about becoming a subscriber to Steel Market Update, need information about upgrading your membership or just need to renew, please contact her at 724-720-1012 or by email: Paige@SteelMarketUpdate.com

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

John Packard, President & CEO

John Packard

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