Economy

Dirty Little Secret: Letters to the Editor

Written by John Packard

March 13, 2016

Steel Market Update received a number of comments regarding our “Dirty Little Secret” article published last week. The first comment comes from Lawrence Cox of McCanch Performance Consulting and formerly with National Steel. Mr. Cox was the individual who was carrying on a debate with Dan DiMicco on LinkedIn. He told SMU:

“Nearly every slab conversion mill in the country represents an operation that formerly possessed a melt shop and whose chain of successive owners decided that it was cheaper to import slab than to melt their own. That’s the fact of the matter. At the same time we hear steel executives who import massive quantities of slabs or band railing against the importation of “unfairly traded steel products” by their customers. Some of the converters are owned by steel companies who have plenty of melting capacity available domestically but who have chosen instead to buy foreign. So if we are to have political dialogue about end users who buy foreign finished coil and line pipe, we need to have equally open and vigorous dialogue about the steel producers who are importing slab, band, and billet and essentially exporting jobs. Until the latter dialogue takes place, I stand by my description of the current situation as the industry’s “Dirty Little Secret”. At least when I imported slabs, I kept my melt shops running full”

A second note to SMU comes from a seasoned trader who wishes to remain anonymous:

Thanks for your article about the “dirty little secret” regarding the importation of slabs and the issue of domestic steel making and rolling capacity. (By the way you left out JSW in Baytown as an importer of slabs).
 
Roughly 25% of the steel consumed in the USA has been imported in the past 25 years and an increasing part of that is slabs. Many mills who were producing their own steel closed their melt shops and started importing slabs.
 
What is so bad about it?  These mills keep American workers employed , provide employment to the service industry such as service centers, trucking companies and others.
 
Look at the US auto industry:  the average content of an ‘ Made in America ‘ car is falling below 75% with 25% of parts being imported from other countries. This is not a matter of capacity but it is a matter of smart business.
 
What makes me smile however every time I read the accusations of ” massive subsidies from foreign governments ” is the fact that these mills are the same who are selling their slabs to American steel companies.
 
A little bit of hypocrisy?

If you would like to comment on this or any other subject you can do so by sending an email to: John@SteelMarketUpdate.com

John Packard

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