Even though China’s economic growth has been falling, its government still gives producers strong incentives to produce steel and aluminum that eventually ends up exported elsewhere. My colleague Stuart Burns rightfully points out that if Chinese mills are “supported by plunging raw material costs and extensive local state support, gifting them a break-even price around the lowest in the world, then the intent to simply ‘dump’ metal into export markets has few barriers.”
Can Debt Fuel Long-Term Growth?
But what’s the eventual result of state support? In China or anywhere else? Can government debt actually lift these economies back into growth mode? Stuart was there again, with an assist from the Daily Telegraph, postulating that sluggish growth and low inflation is the new normal and “advanced economies — and perhaps emerging ones, too — seem to have run out of productivity-enhancing growth and, therefore, need constant infusions of financially destabilizing debt to keep them going.”
Okay, so we have national debt problems that affect more than just metals markets. Even the comparatively strong US economy is struggling. Can’t we at least, however, protect domestic industries such as steel and aluminum with tariffs and other measures to level the playing field?
No One is Buying OCTG Anymore
The US International Trade Commission did just that, reaffirming import duties on steel tubes from China but that barn door was closed only a few hours after the horses got loose. Production of what’s known in the industry as oil country tubular goods (OCTG) is down domestically and overseas.
U.S. Steel has even laid off much of its production force responsible for OCTG in Texas and Arkansas. The cat’s out of the bag on oil prices, too.
Green Energy is Growing, Right?
What about clean, green power that can eventually replace the expensive energy inputs for metals production? We had to look in the mirror and admit how far behind the US is in that, too, this week. While there are 48,000 operating wind turbines in the US, the new Deepwater Wind project, which broke ground off the coast of Rhode Island this week, will be the first to generate its power offshore, a proven method of consistent energy generation. In Europe, there are 408 offshore wind turbines in nine wind farms that are fully grid connected and one demonstration project with a combined capacity totaling 1,483 MW.
Sometimes the ups outnumber the downs. Not in Nottingham or our metal markets this week.