The American public and its industrial manufacturing sector can reach a happy understanding regarding national economic health and betterment. Regardless of doom and gloom merchants on TV and daily print media that harangue in open opposition to President Bush, 2005 is a good year and getting better as we go. Former Michigan governor John Engler, now el jefe at National Association of Manufacturers, recently commented that manufacturing remains the leading contributor to U.S. economic growth, 13% of $1.5 trillion (T) of the $11T gross domestic product (GDP), aided by real estate (12%), business services (11%) and retailing (7%). Manufactured goods still comprise 62% of export value, account for 11% of the American work force and 13% of all private sector employment. The doomsayers harping about the 14.5 million (M) manufacturing jobs as crippling because it is less than the 17M of a decade ago fail to remark that this condition is entirely fueled by improved productivity. Grasping importance of these facts requires an educated citizenry and there, if anywhere, is a weak spot in my view of the U.S. manufacturing sector future.
To readers of this journal, the metals production sector is significant and appears rejuvenated after having protracted decades of rebirth. Macroeconomic conditions seem strong for the U.S. with a 2005 GDP growth rate projected to sustain at 2.7 to 3.5%. The role of steel in this picture is better than in most years. Consider that global crude steel production in 2004 reached a record 1,050 million metric tons (MT) and trade grew 8% to 262 MT; the largest exporters (in MT) were Japan (34.8), European Union, or EU (31.8), Russia (30.4), Ukraine (28.2) and (for the first time) China (20.0), and the largest importers were China (33.2), U.S. (32.8), EU (30.4) and South Korea (17.7). This is a dramatic change for the U.S. because of China's emerging role as a producer, exporter and importer (Table I). U.S. steel production costs now seem to be competitive with peers in a field where American industry has come to realize that a stacked deck for any nation is a bad way to play a game. (He said hopefully.) A good place to check prices and trends is at www.census.gov/foreign-trade/press-release/steel_index.html.
Steel industry analyst James King also offers encouraging words, again using the example of hot rolled coil, projecting the future for cost and price (Table II). He believes there will be some easing of demand during the 2006-07 period but will remain high by past standards. The new giant that must be reckoned with is China, which accounted for 29% of world steel consumption. Global trade in steel exceeded 360MT in 2004, 11% higher than in 2003, and still have overcapacity in 2005, but the balance is shifting toward China and the return of U.S. capacity to seek and seize market share.
It is essential that U.S. metals industries, steel specifically, read and understand this sign, this foreboding. Congress cannot successfully bail out a manufacturing sector, and if the threat is China, as it is now and will grow, there is only one option. Survive, or perish with your nation.