AWPA celebrated its 25th anniversary in Las Vegas last month. Attendance was markedly up from previous years, including the attendance of four past presidents and representation of a fifth - Larry Selhorst, John Mueller, Charlie Salanski, Pete Cronin and H Woltz - who each made remarks on what they remembered most about their presidency. Additionally, Milton M. Magnus III from M&B Metal Products Company was presented with the Max Moore Entrepreneur Award of the Year. Milton expressed much gratitude to the Moore family for this honor. Nominees for this award are drawn from among individuals who are employees of AWPA member companies based on the nominee's entrepreneurial spirit, leadership and community service qualities. The attendees were also treated to a Vegasstyle burlesque show during the dinner celebration. AWPA's current president - Bob Moffitt from Davis Wire - was volunteered as the audience participant. But the meeting was not only about dancers, shows and gambling. There were also very instructive speakers during the two General Sessions. Starting off the event was an animated discussion of what Congress should, and should not, do about our trade policy with China. Nick Lardy, a senior fellow at the Institute for International Economics, took the view that maybe things were not as bad as they seemed with respect to our trade with China. Currently, China is the third ranked country in global trade, and its GDP is growing at a rate of 10%. Lardy did agree that China was the largest contributor to the US trade deficit. However, while in the 80's this Asian giant was highly protectionist of its market, this trend is changing. Its average tariff now is about 2% - much lower than India. Further, the requirement for import licenses and quotas is virtually non-existent anymore. With respect to the steel market, China is responsible for one-third of all global steel trade production. Currently the country has 70-80 million tons of excess capacity. In 2003, China was the largest importer of steel; in 2005 the country became a small net exporter. Lardy foresees that in the short-term, China will be a disruptive factor in steel trade worldwide, but in the long-term the steel trade situation will even out. Overall, Lardy concluded that China is a pretty open market. It is the third biggest importer and has very low tariffs. While he concurred that the country does have a very undervalued currency, Lardy questioned what the US could do about that problem. While the Treasury Department is negotiating with China about their currency, the US really does not have much legal leverage to force these leaders to do anything about it. Any remedies that Congress is considering (i.e., across-the-board tariffs until they fix the currency problem) would not be WTO-legal. Dick D'Amato, a Commissioner with the US-China Economic and Security Review Commission, offered a slightly different view of the situation. While the speakers both agreed that the undervalued currency is a problem, D'Amato felt more should be done. The Commission, which was established in 2000 after China received PNTR and acceptance into the WTO, recently released a number of recommendations on what should be done about the US-China trade relationship. Number one is to do something about the currency. China's undervalued currency undermines the competitiveness of US-based manufacturers and reduces the profitability of these companies, thereby reducing their ability to invest in new production capacity. It is critical for China to change its currency policies in order to affect less distortionary currency policies in the greater Asian region. Further the Commission believes that the trade situation with China is not improving at all, and they do not foresee the situation getting any better. Several years after its acceptance into the WTO, the Chinese government's policies do not aim to steer the economy toward the most efficient, market-oriented goals, but rather toward the economic supremacy of its domestic companies and dual-use application industries. This strategy, according to the Commission, poses serious implications for the US economy, industry and government policies. In conclusion, D'Amato advised that it is critical for US companies to join the US government and demand real, not rhetorical, change from the Chinese government to enable US companies to compete fairly. China has demonstrated flagrant disregard for the rules of the international trading system, and if the behavior is not abated soon, the rules will no longer apply. Rounding out the China Trade Panel was Patricia Mears, the Director of International Commercial Affairs for the National Association of Manufacturers. She began by stating that China remains our greatest challenge, and greatest opportunity for manufacturers. Like many groups, the NAM members were torn between those who viewed China as their future, and those who believe China is forcing them to close their plants here in the United States. However, NAM realized that they had to develop a firm stance on China despite the split in their membership. On the legislative front, NAM does not support placing tariffs on Chinese goods coming into the US. This would be WTO-illegal. However, they do believe that the US must enforce its trade rules to ensure that the Chinese market is open to US goods. Other goals NAM put forward include revaluing the yuan; eliminating Chinese regulatory and standards barriers; expanding export promotion efforts; retaining China's nonmarket economy status as negotiated; and promoting fair competition. Specifically, NAM has announced its support of S 1421, which would allow countervailing duty cases to be brought against non-market economy countries, including China. The organization is also urging Congress to increase funding for export promotion programs to China, and to press Treasury and the IMF to fix the currency problem. However, Congress also can fix problems for manufacturers here at home, like excessive corporate taxation; escalating health and pension costs; out-of-control litigation costs; rising regulatory compliance costs; and soaring energy costs. These selfimposed costs add up to a 22% penalty for manufacturing in the US. Leaving China, sort of, attendees heard presentations about the rod supply situation in the US. John Foster, Chief Operating Officer of Ferrostaal Inc. stated that steel imports continue to move up and down, and in 2007 he foresees a decrease in imports. World growth, although slowing, will remain robust through 2006. The US and China continue to be predominant driving forces of the world economy, but the unbalanced growth of China is not sustainable in the long term. However, China is beginning to understand the need for more equilibrium between supply and demand for steel in their country. Global steel demand is expected to see a 7.5% growth in 2005 and another 6% in 2006. Imports of wire and wire products continued to increase in 2005, and will probably continue to do so in 2006. H Woltz, President & CEO of Insteel Industries gave the rod supply perspective from a wire manufacturer. He believes that final rod consumption will likely exceed 7 million tons for the first time since 2002. US wire rod consumers are confronted with unprecedented import competition in finished product markets that requires micromanagement of every cost line. Further, domestic wire rod prices are substantially higher than world market prices, driving consumers to maximize import commitments. Woltz added that the up tick in projected apparent consumption in 2006 camouflages the negative outlook for a large segment of domestic wire rod consuming industries. The US market for consumers cannot purchase competitively relative to the world market. The market might shrink anyway, without regard to US rod pricing, as wire and wire product imports continue to rise. As always, AWPA attendees also heard from a panel of wire supplying companies. Peter Hogg, Director of the Wire Rod Business at Corus, discussed his company's ability to obtain many different wire rod products available to rod consumers. The company specializes in sourcing and supplying commercial grade steel and related products to service centers, re-rollers and end users around the world. Corus aims to be the quality importer of choice for the North American market. Rajiv Ranjan next talked about his company - TATA Inc. This company was established in 1945 and is actively engaged in selling rebars, wire rod, PC strand and galvanized wire to leading companies in the US. TATA also has a minerals and metals division. Finally, Stuart Wallenstein, Vice President for Wire Rods, Bars and Pipe at Arcelor, gave some details about what his company offers wire rod consumers. The Arcelor Group is comprised of several different steel facilities that together produce flat steel, long steel and specialty flat steel products. Their locations in the US are in San Francisco, Houston, Atlanta, New York, Chicago, Detroit and Cincinnati.   American Wire Producers Association |
