December 24, 2004
TOO BAD WE DROPPED THE TARIFFS:
Accustomed to excess, Japan faces a shortage (Todd Zaun and Wayne Arnold The New York Times, December 24, 2004, NY Times)
It has been a very long time since Japan has experienced shortages of anything.So it was a big surprise last month when Nissan Motors was forced to temporarily idle much of its production because it could not get hold of enough steel. Since then, Suzuki Motor said a lack of steel would force it, too, to shut down assembly lines for a few days this month. Even Toyota Motor said it had had to make adjustments in the kind of steel it buys to ensure supplies remain steady.
The shortfall in steel is unusual in a country that for most of the past decade has been dealing with problems of excess - too many workers, unused plants and more banks than needed - but analysts and executives say it is a problem that could become increasingly common.
Although widespread shortages are not expected, analysts say the supply of steel is likely to remain tight for at least the next six months, a situation that could drive steel prices higher, and in turn, raise costs for carmakers, construction companies and other industries that depend heavily on steel.
So far, shortages have been limited to the high-grade steel used as automotive sheet metal. But strong demand, particularly in China, for everything from ships to office towers to home appliances is driving steel prices broadly higher, with some markets recording 60 percent increases over the past year.
"This is not a problem that can be solved in the short term," said Takeo Fukui, chief executive of Honda Motor. Strong demand in China, India and elsewhere combined with limits on how fast steel production can be raised, he said, means supplies will remain tight for "one, two or maybe several more years."
After years of consolidation in the global steel industry, many producers are operating near peak capacity. In Japan, where the number of large steel manufacturers has dwindled because of mergers, the industrywide capacity utilization rate is now 15 percent higher than the average rate of the past 26 years, according to statistics from the Ministry of Economy, Trade and Industry.
Which is why the survival of your domestic steel industry can't be left to the market--it doesn't matter much if the Japanese can't make cars--plenty of other countries will--but it would matter if we couldn't get steel for weapon-systems. Posted by Orrin Judd at December 24, 2004 8:38 AM
Steel industry? Didn't we have a big steel industry not that long ago? Around Pittsburgh, I think.
Whatever happened to it? Oh yeah. Now I remember. It was killed dead by the greedy unions and now is no more.
Pity that.
Posted by: at December 24, 2004 8:58 AMWell, except in Ohio, Baltimore, and elsewhere...
Posted by: jsmith at December 24, 2004 2:54 PMAs long as we have effective control of where steel gets manufactured it really doesn't matter. During the Cold War, this was a much more serious problem because there really was an attempt by the Soviets to keep us from gaining access to necessary strategic minerals. Today, and for the foreseeable future, this is not an issue. Mexico is a major steel manufacturer and they need the cash.
The only place we have to be concerned today is with respect to oil, and even there OPEC only controls about 25% of supply.
Posted by: Bart at December 24, 2004 5:40 PMAs long as we have effective control of where steel gets manufactured it really doesn't matter. During the Cold War, this was a much more serious problem because there really was an attempt by the Soviets to keep us from gaining access to necessary strategic minerals. Today, and for the foreseeable future, this is not an issue. Mexico is a major steel manufacturer and they need the cash.
The only place we have to be concerned today is with respect to oil, and even there OPEC only controls about 25% of supply.
Posted by: Bart at December 24, 2004 5:41 PMOJ's position was also Stalin's position, which is (a) why he called himself Stalin (Russian for steel) and (b) why every little Communist satellite also had its own steel industry. That was one of the things that led to the downfall of Communism in Poland, and thus in eastern Europe.
Speaking as someone who spends a substantial portion of every week thinking about steel, it's very expensive right now, but available (though if anyone knows where I can get a coil of 94" wide 10 ga steel for under 80 cents/pound, be sure to let me know).
Posted by: David Cohen at December 25, 2004 9:23 PMThe raw materials for waging war are far greater in variety than just steel. Free and fair markets will keep our munitions available. The Boeing-Airbus playing field is more important than nationalizing our steel industry.
Posted by: JimGooding at December 25, 2004 9:26 PMThe tariffs had nothing to do with it. That was part of their brilliance -- they looked good, but affected nothing.
Posted by: David Cohen at December 26, 2004 5:56 PM