Final Thoughts
Final Thoughts
Written by John Packard
April 11, 2016
You will be hearing and seeing much more about whether China should be allowed to have “market economy” status. While I don’t pretend to be an expert on the subject, I am learning that as a market economy any trade suits against China would have to be conducted differently than what is currently being done as a non-market economy. Today, even the American Institute for International Steel (AIIS) came out against allowing China market economy status. Their reasoning being most of China’s almost 1 billion net tons of steelmaking capacity is owned by government entities. Their only motivation is for employment out of the mills and not profits. This is obvious when you see a mills in China reporting billions of dollars in debt with no way to repay the debt yet, they continue to produce steel.
Dan Pearson an economist at the Cato Institute and former head of the International Trade Commission (ITC) here in the United States published an article about trade remedy “cure” being worse than “disease” of over-capacity. In his view let China export their wealth to the United States at the expense of their own citizens. He also believes that U.S. steel mills will ultimately survive (I am not sure on that one). Nonetheless, China has to develop the will to stop the losses and the transfer of wealth out of their country to another and setting up trade barriers is not going to be successful.
We provided a link to the Cato Institute article and we will write more about this in Thursday evening’s edition of Steel Market Update.
Wow, this has been a very difficult week for me to analyze pricing. SDI opened their order books for May this morning at $25.50/cwt on hot rolled ($510 per ton) and $34.50/cwt base on coated. There were no cold rolled spot tons available out of the Butler facility. We were told Nucor spot order book is not open and at least one of their plants (Decatur) was said to be out of the spot market until July (which is not yet open). AK and ArcelorMittal were reported by buyers as having little to no spot tonnage available.
I have actually gotten phone calls from experienced buyers asking me for recommendations where they might be able to get certain items. Interesting times…
By my estimation there could be a 4-8 week gap in some companies order books.
Someone made a comment to me the other day about this being a test for those purchasing agents who did not live through 2004 and 2008/2009. This market could very well test their mettle. Will they over-react or stay within themselves and protect their company and their customers? Did they plan ahead and anticipate this market? I know I (and Andre Marshall) have been warning of this market for a couple of months now.
When markets get funky the rumor mill begins to work overtime. A good example was we were told this afternoon that SDI open and closed their order book in one day. This was found out to be not true (although they have limited items available for spot customers).
I appreciate buyers (and sellers) contacting me to keep me abreast of the news regarding each mill. If you have something you would like to share with me you can reach me at: John@SteelMarketUpdate.com or at 800-432-3475.
As always your business is truly appreciated by all of us here at Steel Market Update.
John Packard, Publisher
John Packard
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