Notes From Association of Steel Distributor Spring Meeting

1) China will be going through a prolonged period of slow growth.
2) Oil will have an extended period of low prices.
3) The consumer in the U.S. is being very cautious.
4) The financial community and stock market will struggle.
5) Government debt and very low interest rates will rob the system the ammunition needed to boost the economy out of a slump.

In his “tongue in cheek” way Dr. Kuehl pointed out that the number 1 item being purchased by Millenials is Apps. He told the group, “There is not much steel in apps.”

One of the presentations at the Association of Steel Distributors spring meeting had Scott Paul, President of the Alliance for American Manufacturing and Tim Brightbill, Partner at Wiley Rein LLP’s International Trade Practice. Both gentlemen are associated with the domestic steel producers and were united in their opposition to the Trans Pacific Partnership which is a free trade agreement between the United States and 11 Pacific Rim countries. China is not one of the countries included in TPP.

For the treaty to take effect the United States, Japan and four other countries must ratify the agreement.

The issue with the agreement is it will not benefit the manufacturing segment of the U.S. economy. They pointed to the South Korean free trade agreement as an example where Korean exports of autos and steel have increased resulting in a loss of American manufacturing jobs.

In a study conducted by the Institute for International Partnership and cited by the speakers, they expect U.S. manufacturing to produce a $55 billion deficit and lose 220,000-300,000 jobs due to the TPP agreement.

In order for the TPP agreement to be ratified they are calling for there to be something in the agreement for the manufacturing segment of the U.S. economy. They suggested that a trade be made with the U.S. government where manufacturing would receive larger infrastructure spending by the U.S. government as an inducement to support the TPP agreement in Congress.

China Request for Market Economy Status

China became a member of the World Trade Organization 15 years ago. Since that time China has been considered a “non-market” economy. As part of their membership to the WTO there was an agreement that the U.S. and other countries would consider making China a “market” economy at the end of the 15 year period which provides them privileges and protections from trade suits which they currently do not enjoy.

Both the Alliance for American Manufacturing and trade attorney Brightbill (his company represents Nucor) are against China being given market economy status.

Nicholas Tolomeo, Associate Editor for Steel Scrap at Platts told the group that the ferrous scrap markets continue to be very fragmented. Much like steel the price of scrap went too low during 2015 which resulted in low flows into the collection yards. “Scrap is a product of affluence. When times are tough you hold onto that appliance or keep the car for another year or two.”

With Detroit moving up $50 per gross ton for April he thought that we could see scrap up by $60 to $70 per gross ton in some regions.

He does not expect a correction in May. “Scrap dealers do not think they will be on the losing end until June at the earliest.” By then weather and higher buying prices will pull some of the scrap off the sidelines and back into the scrap yards.