Describe the global steel industry from 1990 to present day. Major companies, imports and exports to US. Provide financial data regarding global sales and profits for major steel producers.
The condition in the global steel market has improved over the past years, which indicates a turnaround to the increasing demand and production of global steel along with modified steel prices and better profit in some market segments. The U.S. steel industry has faced lot of difficulties since the end of 1990s due to the bankruptcy of more than 30 U.S. steel producers. The policy makers in the U.S. tried to reduce the impact by using different measures but the down turn in the end of 2000 and 2001 could not be prevented. However, the rate of imports increased in 2000 after facing a decline in 1999.
In North America, the US shipments of steel remained stable at 86.5 million net tones in 2016, which is similar to the record of 2015 ("Steel market developments", 2018). There was a decline in the steel imports in 2016 resulted in the probable decrease of steel consumption. However, demand of steel related o energy was considered as a significant factor for the growth of US market.
In South America, the steel market faced a tough time in the year 2016 as the consumption of steel fell in the countries of Ecuador, Brazil, Chile, Argentina and Colombia (Guo et al., 2018). The effect was felt in terms of export due to the reduced consumption in these countries. The decreased steel consumption was felt in the year 2012- 13 too. The major steel import and export companies in the USA are AK Steel, Allegheny Technologies, Commercial Metals Company and Crucible Industries.
China is the leading producer of steel with an enormous 49% among the 1.7 billion metric tons of global steel production (Hodin, 2017). Other steel producing countries in the past had accused china for loading steel on other markets, which resulted in decreasing prices. It had a negative outcome as the rivals were removed from the business and thousands of jobs were ruined. There were certain times when the steel producing countries were experiencing a difficult time due to insufficient supply and demand. However, China’s entry resulted in the flooding of steel production in the market by making cheap steel including the United States.
The steel prices in China have increased in the previous year due to decreasing capacity and increasing demand from the key downstream industries. Hot- rolled coil prices in the eastern part of China were traded in the range of 2890- 4360 yuan per ton in comparison to 1940- 4020 yuan per ton in 2016 (Jones, 2017). The pricing of the steel products in China displayed different characteristics in different steps of economic development. In order to promote the upturn of the national economy and to alleviate the price of market and product, a low pricing strategy was followed at the combined ex- factory price.
The US president has decided to compel punishing tariffs on the imported steel and aluminum in an important boom of his deal offensive. The president mentioned that a tariff of 25% has been imposed on imported steel and 10% on aluminum (Modaresi et al., 2014). Donald Trump, the president of the US ignored all the pleas of heavy steel and aluminum manufacturing companies such as the automakers. The tariffs were previously imposed in 2002 in the US which resulted in the loss of 200, 000 jobs.
The tariffs were proposed to fight back against the assault faced by US by the foreign competitors. He also added that Canada and Mexico would be excluded as a special case at the time of discussing about the changes to the North American Free Trade Agreement (Xu et al., 2016).
Tariff is imposed on the value of the item, such as 10% of aluminum or 25% of steel. Tariff is imposed by the government in order to increase revenue and protect the local industries from the hands of foreign investors, especially the emerging ones. It will help the government to save the jobs by protecting the industries. Tariff imposing is an effective way to raise government funds and important for import and export of goods.
It has a very positive impact in achieving the short- term goals. Tariffs are helpful in checking the instability generated from the policies, which were effective for short- term but not long- term. The policy makers in the US had given much thought on the benefits of imposing Tariffs. The domestic industry is benefitted during its potential risky situation by asking the Congress to impose tariff on the imports of the foreign competitors. It is helpful for the sector by creating more job opportunities. The workers’ lives are improved in this way (Zhang, 2016).
There is a risk of exporting own technology to another nation for using labor at low cost. There might be a tendency to depend more on the other country’s resources. It increases the price of importing commodities. It is responsible for pushing a tradeoff between the consumers as well as the workers. Tariffs have another disadvantage in the form of hitting back other countries. When the tariffs are increased on similar category of products for protecting the local industries, a downward economic spiral is formed leading to depression. For instance, the US tariff was imposed with the intention of creating job opportunities but it raised the cost for the steel users ("Policy responses to steel crises", 2018).
The decision of President Donald Trump regarding tariff impose on the import of steel and aluminum will lead to decrease in profits among a wide range of companies. The consumer prices will also be increased. This plan of the President was made in haste and therefore it lacked details. The manufacturers were scared that the negative impact would hurt them directly. As per this decision, the local steel manufacturers would make more money than the local consumers would. The steel producers will have a rise in the pricing power with the increasing cost of steel imports. The most significant impact will come in the form of increase in cost due to the import of a large amount of aluminum. The US automakers were leading in facing the outcomes of tariff impose in the US. They had to struggle with higher commodity costs and it would affect their 2018 profits ("Steel market developments", 2018).
References
Guo, M., Lu, L., Sheng, L., & Yu, M. (2018). The Day After Tomorrow: Evaluating the Burden of Trump's Trade War. Asian Economic Papers, 17(1), 101-120.
Hodin, M. W. (2017). A National Policy for Organized Free Trade: The Case of US Foreign Trade Policy for Steel, 1976-1978 (Vol. 18). Routledge.
Jones, K. (2017). Politics vs economics in world steel trade(Vol. 20). Routledge.
Modaresi, R., Pauliuk, S., Løvik, A. N., & Mu?ller, D. B. (2014). Global carbon benefits of material substitution in passenger cars until 2050 and the impact on the steel and aluminum industries. Environmental science & technology, 48(18), 10776-10784.
Policy responses to steel crises. (2018). Oecd.org. Retrieved 22 March 2018, from https://www.oecd.org/industry/ind/42980369.pdf
Steel market developments. (2018). Oecd.org. Retrieved 22 March 2018, from https://www.oecd.org/industry/ind/steel-market-developments-2017Q2.pdf
Xu, L., Wang, L., Chen, Y. C., Robson, J. D., & Prangnell, P. B. (2016). Effect of interfacial reaction on the mechanical performance of steel to aluminum dissimilar ultrasonic spot welds. Metallurgical and Materials Transactions A, 47(1), 334-346.
Zhang, Z. (2016). The US proposed carbon tariffs, WTO scrutiny and China’s responses. In Legal Issues on Climate Change and International Trade Law (pp. 67-92). Springer, Cham.
