COMMENTARY: Walt Robertson weighs in on China and the state of world trade

Feb 23, 2014 | 06:01 PM | Walt Robertson

Tags  Walt Robertson, Johnstown Wire Technologies Inc, China, international trade, manufacturing, World Trade Organization, commentary

In June 1994, while attending AMM’s Steel Survival Strategies IX Conference in New York, several people pointed out that for the first time ever there were attendees from China, and openly wondered why they were there.

It turns out they were there to begin executing a national strategy to make China the world’s manufacturing hub, and—as we’ve learned over many years—one of the first things developing nations concentrate on is building a steel industry to support manufacturing growth and infrastructure development.

Twenty years later, China produces around 800 million tons of steel annually, which is roughly 40 percent of the world’s capacity, and in my market sector of wire rod it produces nearly 160 million tons annually, giving it a 70-percent world market share. The only appropriate word for this is "dominant."

There have been numerous reports documenting how China got here that discuss government subsidies, the fact that most of its steel companies are state-owned enterprises, various egregious mercantilist policies, currency manipulation and more, but the fact is that this capacity is in place and, China’s rhetoric aside, probably still expanding.

Go figure, because I’ve never heard one steel expert or analyst expound on China’s comparative cost advantages that usually accompany massive investment like this; rather, except for cheap labor, the reverse seems to be true.

The reality is that for many years now China has been a massive manufacturing hub and an export giant, and today it is the second-largest economy in the world. Their success has been so great that, coupled with the demand associated with their infrastructure build, China’s consumption of iron ore, copper, tin and other basic materials so dominates world markets for these commodities that reports on China’s economy are market makers on a daily basis. ....

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