A couple months ago we told you about how a couple of industry trade groups, the Alliance for American Manufacturing and the Domestic Manufacturing Group, were busy complaining about the evils of unfair foreign competition, particularly in steel.
Manufacturing News recently reported on the creation of the Alliance for American Manufacturing, founded by the management and union of U.S. Steel. The purpose of the AAM is to review the dire straits of American manufacturing, the pressures we're under from foreign competitors who trade unfairly and to focus the intellectual piece of the advocacy on this problem.
But while they were busy complaining, something interesting happened...
ThyssenKrupp AG, a German steelmaker, announced they are building a new $3.7 billion 2,700 worker steelmaking complex in Alabama. Yes, Alabama is in the United States, not China. Imagine that... it's cheaper for ThyssenKrupp to ship bulky crude steel to the U.S. and use energy-intensive processes in the U.S. than to process it with cheaper Brazilian energy and ship smaller volume final steel to the U.S.. Nucor and U.S. Steel are crying about lost jobs, but ThyssenKrupp is creating jobs.
Unfortunately it looks like U.S. steel companies still haven't bothered to look over their shoulders, let alone try to figure out why some foreign steel companies believe they can be profitable from U.S. plants.
Monday, a group of American steel associations will release a report that says China steelmakers get tax breaks, loans and all manner of government subsidies that make for unfair competition.
But luckily the WSJ is fairly balanced, so they do report on the other side…
To be sure, American steel mills get subsidies also. Most notably, many U.S. mills went through bankruptcy in the past few years and cast millions of dollars in retiree benefits onto the government only to emerge leaner and more profitable.
Perhaps if they'd focus more on the opportunities of market demand rather than on whining and complaining they could make a buck.
The U.S. needs to import 20% to 30% of its steel because domestic mills, even running at full tilt, can't make enough to meet domestic demand.
Most companies can only dream of such demand. But here's the real knock, and the real opportunity: foreign steel companies don't even want to sell to the U.S. as there are better markets elsewhere.
Steelmakers will have to prove that they are being harmed by imports. And the U.S. steel market isn't a great place for imported steel these days, with foreign steelmakers able to fetch higher prices outside of the U.S.. Transportation costs also are high, hovering around $60 a ton just to get the steel from the foreign make to the U.S.'s East or West coasts. Tack on a few more dollars a ton to get it ot the Midwest, and the [foreign company] profit margin is wiped out. Finally, the dollar is weak, making it even less profitable for foreign steelmakers to sell in the U.S.
Having just returned from dropping off a small package at the post office, I'm rather amazed I could send a ton of steel from China to the U.S. for $60.
If U.S. companies could get their act together, reducing internal waste and cost, they would own the U.S. market. Apparently that's what ThyssenKrupp understands, and why they're investing in a U.S. plant. I've said it before, and I'll say it again:
Stop whining and start competing!