Serious students of steel trade know what to expect after observing Chinese tactics over the last several years . . . more of the same.
The eyes of the world have been focused
recently on China as Xi, the countrys leader, consolidates his power with another five-year term and without naming a successor.
Xi is head of the Communist Party, head of the military, and head of the civil government. This is not good news for the world steel industry as gross over-building of steel capacity in China has been perpetuated under Xis time in office.
The message here crudely translated is: China will continue to defy international trading rules; and steel will continue to be a government champion.
The only people who construe this as a positive development are Richard Chriss Esq., president and international trade counsel, the American Institute for Imported Steel (AIIS), the trade association for steel importers, and Graham Allison, a totally naive Harvard professor.
Both would look to The Global Forum on Excess Steel Capacity, an all-voluntary debating society, to address and solve this problem in gentlemanly fashion.
For more explanations from the Delay Society, you are referred to Letters to The Editor in the Wall Street Journal dated Thursday October 26.
What is the dimension of global, excess steel capacity? The numbers are slippery, but if the U.S., Japan and the EU shut down their respective industries, the world would approach equilibrium.
Most estimates peg global steel excess capacity in the 400- to 600-million-ton range. And so far, China has maintained a posture that would let the market solve the problem.
Four words to the wise: Dont hold your breath.
We will build a wall on the Mexican border that the Mexicans pay for before the The Global Forum on Excess Steel Capacity produces any meaningful impact on Chinese steel capacity.
Serious students of this subject know what to expect after observing Chinese tactics over the last several years. Expect Xi and China Inc. to:
1. Announce zombie plant closures
2. Merge and enlarge profitable plants simultaneously
3. Never, never report net change in capacity
Closer to home, the Trump administration took office promising rigorous enforcement of U.S. trade laws. They are still promising such action, but only after Tax Reform, Health Care, Immigration, etc., etc.
One sane observer noted that the Chinese plants are major sources of pollution and the U.S. economically suffers the unemployment created by Chinese imported steel.
He is quoted as saying we are exporting jobs and importing pollution.
Thomas C. Graham
Thomas C. Graham is a founding member of T.C. Graham Associates. He is a former chairman and chief executive officer of AK Steel Corp., president and chief executive officer of Armco Steel Co. LP, chairman and chief executive officer of Washington Steel Co., president of the U.S. Steel Group of USX Corp. and president and chief executive officer of Jones & Laughlin Steel Co. His column appears monthly. He invites readers comments and can be contacted at email@example.com.