Monday, March 5, 2018

What Really Happened to the Steel Industry

With all this tariff talk, it's probably necessary to go back and review what's happened to the industry over the past forty-odd years.

So I've come to three basic observations:

1.  China and India went to a strategy in the 1990s to gear up....offering cheaper made steel (commonly referred to as crude steel).  Between the two of them....they contribute about 60-percent of the crude steel that you see in the world.  China is at number one with 831 million metric tons, and India sits at number three with 101 million metric tons.  Number two?  Japan, 104 million metric tons. (Wiki data).

The US sits there at 81 million metric tons.  If you use 1980 numbers...the US was near 101 million metric tons.  And in that period of 1980....China and India together...could only produce 47 million metric tons.

Using the same 1980 numbers....Germany slipped from 51 million metric tons, down to 43 million metric tons.

So a lot of countries figured out the path to competition with cheaper wage results making it possible to out-compete.  How do you defeat this result of competition?  You are basically stuck with tariffs unless the other country agrees to some self-enforcement or limiting you'd see in a treaty. 

2.  Giving up on crude steel.  A number of European countries who used to be hyped up and putting effort into crude steel....gave up.  What they saw was technology and specialized steel projects being their end-results.

There's a company down in Austria that used to have around 200 employees, and they made steel cabling.  About twenty years ago, they arrived at a new technology....they needed only 13 employees to make their output.  They survived by changing their whole approach to cost with the aid of technology. 

Across Germany, France, the UK, Austria, find the same trend.  If you have a project which requires a particular steel product with a high grade of precision....the odds are that you will go to one of those nations to buy the product.

3.  Finally, the import game.  Who imports the most steel around globe?  The US is number one, with Germany set as number two.  The two nations who probably need the tariff the most?  Well, you'd start to think over that suggestion.

So you come to this whole tariff talk by President Trump.  The US industry can't compete against China and India for crude steel.  Germany, as well, can't compete against China and India. For the Germans, along with much of Europe....they've just given up and said the jobs can go....we will only cover specialized steel.  Eventually, most people expect China and India to center their efforts on acquiring technology, and getting to the point of making specialized products.  Then? have to wonder if the EU, or German leadership will just flop around and refuse to do anything for their industry.   

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