Chinese cold-rolled sheet metal is being offered at increasingly competitive prices, according to a recent report from American Metal Market (AMM). The material can now be obtained at a steep discount to domestic product, which industry experts say is largely due to recent oversupply and overall slowing demand in China.
Much to the surprise and frustration of the manufacturing sector, Chinese cold-rolled prices are even lower than hot-rolled sheet prices in the U.S. This is cause for some concern, as transactions from other foreign mills are now being negatively affected because buyers are bargaining down prices.
China’s share of the U.S.’s cold-rolled market was lower between 2006 and 2009; but with 113,103 tonnes of Chinese cold-rolled sheet arriving in the U.S. during the first half of 2012, China could be looking at an upswing.
While China’s exports are causing frustration in the U.S., China itself may not be making much of a profit – demand is extremely weak there, as are prices. Chinese mills continue to compete with each other for the U.S. manufacturing sector, and many are not seeing much return on their cold-rolled investment and efforts.
Data from AMM.com
The Chinese steel industry is running into some issues with its steel production. The government is struggling to adopt new policies limiting steel production over the next few months. China’s steel output has been remarkably high in 2012, despite declining prices, and oversupply is largely to blame for these lower earnings.
Some officials, such as Zhang Dechen, head of the raw materials department at the Ministry of Industry & Information Technology (MIIT), believe that it would be most prudent to wait for the economy to influence the steel industry, rather than trying to influence the steel industry by limiting steel production.
Some mills have been going in the opposite direction, however, replacing smaller blast furnaces with bigger ones, and continuing production after inspections have been completed. These mills are sometimes effective in stimulating economic growth by supplying steady employment, and officials are reluctant to shut them down, even temporarily.
The November elections are creeping up, and both presidential candidates are emphasizing their dedication to strengthening the domestic manufacturing sector. Specifically, both men are working to address the public’s concern over China’s growth, possible violations of international trade rules, and corner on jobs that could be going to U.S. workers.
Some analysts find this surprising, noting that these topics are now hotter than ever, whereas they have taken a backseat in past general election campaigns. But the move by both candidates to highlight manufacturing is a wise one; several swing states, including Ohio and North Carolina, are heavily invested in the industry.
In several recent examples, Obama has filed a trade case against China for providing unfair subsidies to exporters of automotive parts, and former governor Romney has stated that if elected, he will name China a currency manipulator.
Manufacturing industry leaders agree that a large percentage of goods produced in the U.S. come from the manufacturing sector, and U.S. citizens are beginning to press for better, healthier, and stronger international trade relationships. Both presidential candidates are highlighting their commitment to making the American manufacturing sector globally competitive.
Although issues raised during presidential campaigns are not necessarily addressed after election, the fact that manufacturing is taking center stage now makes it more likely that progress will continue in the future, if the topic can stay present and relevant in the minds of the president and the American people.
Flat-rolled steel prices on the west coast have dropped by $30/ton or more over the last few weeks, and industry professionals do not foresee a recovery in the month ahead. According to a recent article in AMM (October 1):
Hot-rolled coil prices for large or established customers on the West Coast, produced either locally or east of the Rockies, have fallen to an estimated $660 to $680 per ton ($33 to $34 per hundredweight) delivered. That’s down from about $700 to $720 per ton in late August and very early September, before it became clear that two major domestic steelmakers wouldn’t be hit by possible labor disruptions.
While hot-rolled futures aren’t looking very optimistic, cold-rolled coil is performing well overseas. China is reportedly offering cold-rolled coil at prices even lower than domestic hot-rolled. Some galvanized distributors are said to be purchasing a good portion of their tonnage overseas, and using their domestic mills largely for fill-in needs.