As economies develop, steel is needed to build infrastructure at large, as well as for products for newly affluent consumers.  
Steel  is used for structural and pilings for buildings, rebar for foundations, rail for railroads, plate for rail cars, and plate and flat roll for heavy equipment. Bars are used for forgings as well as for precision machined parts.
In the graph above you can see that the Japanese followed the same curve as the United States as it developed its economy.
India is just starting on this path.
China is well into its growth phase and following the curve  that the US and Japan followed. At higher rates.
This is why we don’t expect to see ‘cheap steel’ anytime soon.

As economies develop, steel is needed to build infrastructure at large, as well as for products for newly affluent consumers.  
Steel  is used for structural and pilings for buildings, rebar for foundations, rail for railroads, plate for rail cars, and plate and flat roll for heavy equipment. Bars are used for forgings as well as for precision machined parts.
In the graph above you can see that the Japanese followed the same curve as the United States as it developed its economy.
India is just starting on this path.
China is well into its growth phase and following the curve  that the US and Japan followed. At higher rates.
This is why we don’t expect to see ‘cheap steel’ anytime soon.

Transitioning to private enterprise isn’t exactly the easiest thing to accomplish. Rioting workers killed the designated plant manager at Tonghua Iron and Steel in Jilin province,  and left 100’s injured according to press reports from London, NY, and Beijing .
This gives all of us a new point to use when calibrating what is going on in our businesses, industry, and market. Our sympathies go out to the family of the manager killed while trying to do his job.
This affects us because it is a setback to the Chinese government’s efforts to consolidate the Chinese steel industry.   Most of the industry remains under the control of local governments. Consolidation will help the national government rein in overproduction, eliminating overcapacity, and creating larger, globally competitive enterprises out of the companies that survive.

Jilin City, Jilin Province, Peoples republic Of China
Jilin City, Jilin Province, Peoples Republic Of China

Jilin is the self -proclaimed ‘Cradle of the Chinese Automobile Industry’ as well as a major petrochemical, pharmaceutical, and high technology manufacturing center.
The elimination of surplus capacity is essential if there are to be orderly markets in steel across the globe, because  China produces fully one half of all global steel tonnage. But  this event shows that global thinking has local consequences.
The lesson that I get from this incident is that when you don’t have  lawful  and effective means for redressing grievances, the law is created on the spot by the aggrieved. And if there is one thing that can trump ‘the wisdom of crowds’ it is the “passion of the fearful.”
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