Steel prices - Yikes!

[swnoel]

Price gouging and deceptive advertising is the American way.

I was looking at prices on the Chinese mower I bought 2 years ago. The very day the steel tarrifs went into effect the price went up $300. As much as I like the store that sells them I can't see how they justify raising the price that high on existing stock.

Funny how this always seems to be the fact. Remember when gas prices would jump 20 -25 cents in a day... the thousands of gallons in the ground would automatically jump as well!

 

[D2Cat]

They have to replace their goods after they are sold to have some for the next customer. They anticipate that is what the increase will be on the next unit, so they'll have enough to replace inventory.

 

[fried1765]

They have to replace their goods after they are sold to have some for the next customer. They anticipate that is what the increase will be on the next unit, so they'll have enough to replace inventory.

Replacing inventory is why they they are entitled to windfall profits on their existing inventory ......inventory which was bought at a lower price?
Were I come from that is called "gouging".
Obviously they could justify a price increase on NEW inventory, if, and when, the new inventory cost increased.

 

[cdb2]

Folks. I own a consulting firm that my partner and I have had for the last 20 years. A tiny piece is to look at the domestic steel industry as a gauge of the economy as well as a marker for natural gas consumption. Anyway for the past 2-3 months the US mills are running at or near the top of the utilization rate for U.S. mills over the past decade. Overall capacity utilization is now near 80% of nameplate capacity vs 73-75% a year ago. The US mills are turning out about 150,000 tons more per week compared to a year ago. China produces about 50% of total world steel production; the US in recent years about 5%. This issue doesn't turn around overnight; it took many years to get so messed up, it will take quite some time to reverse itself in any meaningful way. But with US steel production up 5-8% from a year ago we are going in the right direction. Be patient; slow progress is happening.

Certainly the steel industry is going to be looking pretty good while a tariff is in place. But it is, of course, at the expense of the US steel consuming industries and consumers who have to pay inflated prices to cover the added production costs. We're the ones paying for the booming business you are seeing.

If the tariff is such a good thing, why have previous tariffs failed to fix the struggling steel industry? What is going to be different this time around?

In 1990 the U.S. produced 50+% more steel than the Chinese; in 2000 they passed us and were producing about 15-20% more than we do. By 2017 they were producing 10 times the steel that the U.S. does. With no unions; no real labor laws; little or no pollution laws, etc. what do you think would happen? The only way to compete once you get the rules fixed is to be smarter and more productive. But you have to get rid of the predatory pricing.

What the steel industry calls predatory pricing, the US manufacturers call a windfall. Why wouldn't you want the Chinese subsidizing US manufacturing by paying for our steel? It doesn't make a whole lot of sense to hobble every successful US industry (and consumers) in order to prop this single one up.

 

[cdb2]

we need to cut off those Countries that are using our money to prepare for war with us, though(2).

Like Canada?

 

[cdb2]

Obviously they could justify a price increase on NEW inventory, if, and when, the new inventory cost increased.

They don't have to justify their pricing at all. They'll price it as high as they think the market will bear, and you have a choice not to pay it if you don't want to.

Remember that the average margin on gas sales is under 3% and that includes the "gouging." It's not like they are laughing all the way to the bank. They could shut down the gas station and go invest their money in the stock market and likely make a better return.

Now if you want to talk gouging why don't you look at the government's take on that gallon of gas; it's a heck of a lot more than 3%.

 

[Snobdds]

Certainly the steel industry is going to be looking pretty good while a tariff is in place. But it is, of course, at the expense of the US steel consuming industries and consumers who have to pay inflated prices to cover the added production costs. We're the ones paying for the booming business you are seeing.

If the tariff is such a good thing, why have previous tariffs failed to fix the struggling steel industry? What is going to be different this time around?



What the steel industry calls predatory pricing, the US manufacturers call a windfall. Why wouldn't you want the Chinese subsidizing US manufacturing by paying for our steel? It doesn't make a whole lot of sense to hobble every successful US industry (and consumers) in order to prop this single one up.

Like Canada?

They don't have to justify their pricing at all. They'll price it as high as they think the market will bear, and you have a choice not to pay it if you don't want to.

Remember that the average margin on gas sales is under 3% and that includes the "gouging." It's not like they are laughing all the way to the bank. They could shut down the gas station and go invest their money in the stock market and likely make a better return.

Now if you want to talk gouging why don't you look at the government's take on that gallon of gas; it's a heck of a lot more than 3%.

With all due respect, I don't think you understand how this works.

 

[cdb2]

With all due respect, I don't think you understand how this works.

Please educate me, I'd like to learn. In particular, any evidence that contradicts my conclusions would be most welcome.

 

[davedj1]

Unions and the EPA are what caused the steel industry in this country to fail. In foreign countries with no regs and low wages they can under sell even with shipping factored in. Just my .02

I talked to my local fabricator today and he said that steel prices have leveled off. He didn't seem to concerned about it. I know when building material takes a jump we just have to pass it on to our customers as well.

 

[airbiscuit]

Unions and the EPA are what caused the steel industry in this country to fail. In foreign countries with no regs and low wages they can under sell even with shipping factored in. Just my .02

I talked to my local fabricator today and he said that steel prices have leveled off. He didn't seem to concerned about it. I know when building material takes a jump we just have to pass it on to our customers as well.

You forgot corporate greed and lack of investment in technology. They all had a hand.

 

[jjp8182]

Why wouldn't you want the Chinese subsidizing US manufacturing by paying for our steel? It doesn't make a whole lot of sense to hobble every successful US industry (and consumers) in order to prop this single one up.

Because trade like any other human invention can be used as a weapon. All that has to be done is making a person/entity dependent enough on you, after which then it's just a matter of twisting them in the direction you want.

In the case of China, it seems pretty evident they've weaponized capitalism against the US (and the rest of the world) through subsidization, and protectionism of their own industries which I'd wager are funded in no small part by the currency manipulation that keeps their goods as cheapest around in both price and quality. Which basically sets everyone else up like they are drug-users and the Chinese government is the only dealer.

Personally, I suspect this steel situation will be a bit like the ammunition shortages of years past and it's just a matter of time before the US steel manufacturers expand capacity to start bringing prices back down - or new players start entering the market with disruptive technologies (i.e. the same sort of thing that brought fracking and oil sands into being) to get a piece of the market share. However, as it's been pointed out, it doesn't do much long term good unless the underlying situation regarding China's trade practices get resolved -- which can only happen through negotiations, and those aren't likely to be fruitful unless China is feel some pain they want to negotiate away.....

 

[airbiscuit]

Just don't understand the animus toward Canada and the love for Dear Leader (literally!).

 

[dragoneggs]

Because trade like any other human invention can be used as a weapon. All that has to be done is making a person/entity dependent enough on you, after which then it's just a matter of twisting them in the direction you want.

In the case of China, it seems pretty evident they've weaponized capitalism against the US (and the rest of the world) through subsidization, and protectionism of their own industries which I'd wager are funded in no small part by the currency manipulation that keeps their goods as cheapest around in both price and quality. Which basically sets everyone else up like they are drug-users and the Chinese government is the only dealer.

Personally, I suspect this steel situation will be a bit like the ammunition shortages of years past and it's just a matter of time before the US steel manufacturers expand capacity to start bringing prices back down - or new players start entering the market with disruptive technologies (i.e. the same sort of thing that brought fracking and oil sands into being) to get a piece of the market share. However, as it's been pointed out, it doesn't do much long term good unless the underlying situation regarding China's trade practices get resolved -- which can only happen through negotiations, and those aren't likely to be fruitful unless China is feel some pain they want to negotiate away.....

Nice post! I wouldn't go so far as to say China weaponized capitalism on us but they are taking advantage of accepted trade policies and manipulation of their RMB. The Trump admin is finally putting some pressure on China. The US can put a hurt on their economy with the current trade imbalance while giving US manufacturers confidence to invest.

 

[cdb2]

Because trade like any other human invention can be used as a weapon. All that has to be done is making a person/entity dependent enough on you, after which then it's just a matter of twisting them in the direction you want.

In the case of China, it seems pretty evident they've weaponized capitalism against the US (and the rest of the world) through subsidization, and protectionism of their own industries which I'd wager are funded in no small part by the currency manipulation that keeps their goods as cheapest around in both price and quality. Which basically sets everyone else up like they are drug-users and the Chinese government is the only dealer.

Personally, I suspect this steel situation will be a bit like the ammunition shortages of years past and it's just a matter of time before the US steel manufacturers expand capacity to start bringing prices back down - or new players start entering the market with disruptive technologies (i.e. the same sort of thing that brought fracking and oil sands into being) to get a piece of the market share. However, as it's been pointed out, it doesn't do much long term good unless the underlying situation regarding China's trade practices get resolved -- which can only happen through negotiations, and those aren't likely to be fruitful unless China is feel some pain they want to negotiate away.....

If I understand correctly, you envision some possible future where, due to having the lowest prices, China has become the only supplier of goods in the world and is therefore able to exert force over us and others. Is that accurate?

If so, what is the mechanism by which they exert this force? By threatening not to sell us their goods? Or by increasing prices?

 

[jjp8182]

If I understand correctly, you envision some possible future where, due to having the lowest prices, China has become the only supplier of goods in the world and is therefore able to exert force over us and others. Is that accurate?

If so, what is the mechanism by which they exert this force? By threatening not to sell us their goods? Or by increasing prices?

Whichever they wish really .....or they could request/force/leverage their companies to insert back doors into smart devices for espionage, censoring, or even sabotage. Alternately, they could further extend their use of so-called "sharp" power. For examples of sharp power they've used already: look to how they've been reacting to airlines who recognize Taiwan -- or the incident where a US-based Marriott employee (Roy Jones) was fired because he unwittingly "liked" a social media posting (on behalf of Marriott) that happened to irritate the Chinese government.

Perhaps some of it's not intended in animus, but given how much of the behavior has continued even after official complaints have been lodged/expressed it's not exactly playing nice. Though when it comes to the currency manipulation they've been doing, it's effectively about the same a putting tariffs on all imports from the US. So as far as I'm concerned, the turn about of explicitly placing identified tariffs on their exports to the US is nothing more than leveling the competitive playing field a little.

Bottom line for me is that if they need to tip the scales of the free market (through subsidies) to be competitive, then it's fair play to level them back out with tariffs - otherwise they may very well be able to do with economics what the Japanese and Germans were unable to do through force in WWII (devastate the US industry and markets). Whatever their reasons, I'd rather not find out to what extent they would leverage such influence given their stance on many basic human rights.

 

[jjp8182]

Nice post! I wouldn't go so far as to say China weaponized capitalism on us but they are taking advantage of accepted trade policies and manipulation of their RMB. The Trump admin is finally putting some pressure on China. The US can put a hurt on their economy with the current trade imbalance while giving US manufacturers confidence to invest.

I'll granted it may not be intentional, but with devastation that has occurred in US industries (which no one has ever been able to do with force of arms) it would seem appropriate to call it a weapon (especially when not all their trade practices have followed accepted trade norms -- with the treatment of intellectual property being a prime example).

 

[dragoneggs]

I'll granted it may not be intentional, but with devastation that has occurred in US industries (which no one has ever been able to do with force of arms) it would seem appropriate to call it a weapon (especially when not all their trade practices have followed accepted trade norms -- with the treatment of intellectual property being a prime example).

True enough... the IP is the big hurt in my mind. That is war.

 

[cdb2]

Whichever they wish really .....or they could request/force/leverage their companies to insert back doors into smart devices for espionage, censoring, or even sabotage. Alternately, they could further extend their use of so-called "sharp" power. For examples of sharp power they've used already: look to how they've been reacting to airlines who recognize Taiwan -- or the incident where a US-based Marriott employee (Roy Jones) was fired because he unwittingly "liked" a social media posting (on behalf of Marriott) that happened to irritate the Chinese government.

Perhaps some of it's not intended in animus, but given how much of the behavior has continued even after official complaints have been lodged/expressed it's not exactly playing nice. Though when it comes to the currency manipulation they've been doing, it's effectively about the same a putting tariffs on all imports from the US. So as far as I'm concerned, the turn about of explicitly placing identified tariffs on their exports to the US is nothing more than leveling the competitive playing field a little.

Bottom line for me is that if they need to tip the scales of the free market (through subsidies) to be competitive, then it's fair play to level them back out with tariffs - otherwise they may very well be able to do with economics what the Japanese and Germans were unable to do through force in WWII (devastate the US industry and markets). Whatever their reasons, I'd rather not find out to what extent they would leverage such influence given their stance on many basic human rights.

You have given examples of non-economic methods of influence (espionage, propaganda, social media, etc...) but my question is specfically about "weaponized capitalism," or how they will use trade to destroy us by making us dependant on them. While quite possibly real and worthy of discussion, none of those other threats are the result of us having any particular balance of trade with them. What is the mechanism by which they will convert their large amounts of exports into coercion of our citizens?

I think it matters because this thread is about a steel tariff, which so far as I can see has nothing whatsoever to do with espionage or propaganda or social media firings, but has a great deal to do with harming Americans. I want to know what market-based threat is so fearful that it is worth the great cost to Americans (in higher prices and lost jobs and retaliatory tariffs) that this tariff will inevitably bring?

And, as a follow-up, if the purpose of the tariff is to negate an existential threat to our country from China, please explain why Canada and the EU are also subject to the tariff?

 

[dragoneggs]

OP here... actually I posted this in the 'Build it yourself' thread because I was recently feeling the pain of buying steel at my LWS and was wondering if other DIYers, fabricators were seeing the same thing. I wasn't really thinking of this growing into a geo-political discussion but since that is what took hold... oh well. Funny how no one really answered my question though.

 

[Big Barn]

Okay Mark to answer your question ,NO.

If I need the material for a project the price is irrelevant. I figure “it is what it is”.

However to prevent a heart attack I just sign the packing slip and have them mail me the invoice. By the time the girls at the office process payment I’ll have forgotten what it was for anyway.