Does anybody remember when Jaws ll was released? I do. And the reason for my memory being so good on the matter is the line, "Just when you thought it was safe to go back in the water...". The rest, as they say, is history.
Ludicrously, I thought I'd use the phrase to start a discussion on Iran's entry into the global steel market, the thinking being that just when you thought it was safe to... and that's where it all fell apart. You see, the steel industry has no cause to relax, no reason to assume that everything is rosy and that's because of our good friends, the Chinese.
Now I know that I keep bleating on about China and its bid for 'market economy status' – something that would be disastrous for the 'rest-of-the-world' steel industry – but regardless of what anybody might say about Iran, China is still the big bad wolf.
If anything, the Iranians are a breath of fresh air for the steel industry – certainly for global technology suppliers such as Danieli Group, SMS Group, Primetals Technologies, Tenova and Fives Group. But not for their American counterparts. Why? Because the Americans are still holding out on sanctions against the Iranians for its links to terrorism and issues surrounding human rights. This seems a little odd when there are no sanctions against other Middle Eastern nations, like Saudi Arabia, for similar reasons, and just as baffling as the strong likelihood that China will be granted MES in December this year. Why would a non-market economy be granted MES? Now there's an exam question for students of politics and economics.
My dear old dad – God rest his soul – used to say, for some odd reason, "It's a funny old world we live in, but the world's not entirely to blame." I've never truly understood the sentiment behind that statement, or where it came from, but I'm kind of getting there.
It is a funny old world we live in. It wasn't that long ago when George 'Dubya' Bush described Iran – or iRan – as the 'axis of evil' and yet today the tables are turning. Many would argue that Bush and Blair are the cause of all the evil goings on in the Middle East today and some would argue that they are war criminals.
But putting international politics aside, the jury is out on whether lifting sanctions against Iran is a good or a bad thing for the steel industry. Good for steel production technology suppliers, maybe, (it's a new market) but perhaps not so good for the steel industry as a whole in terms of current overcapacity problems.
According to the World Trade Association, Iran is the largest steel using country in the Middle East region (18Mt) and with a clear need to invest heavily in its national infrastructure, there's a lot of excess steel floating around the world today that might well come in handy.
For more on the Iranian steel industry, see page four for our special News Focus article.
There was a time when the government – or the ‘powers that be’ – could be trusted with the welfare of the people. When I was a kid I had a kind of blind faith that those elected to run the country (and the world) were intelligent human beings who had the greater good of the people at heart. If we invaded a sovereign nation, we had good reason to do so; if we closed a hospital it must have been because it presented a public health risk and if we incarcerated a body of people it wouldn’t be before they were all given a fair trial in front of a jury.
Today, I’m not so sure if any of the above still ring true – or whether they ever did. In his latest book, The Road to Little Dribbling – more Notes from a Small Island – Bill Bryson sums it up nicely: “In countless small ways the world around us grows gradually shittier.”
The political landscape of the 21st Century is characterised by ‘career politicians’ and self-interest rather than a sense of philanthropy and well-being. Most tellingly, however, it’s all about greed. Iraq wasn’t about saving the world from weapons of mass destruction; it was about oil and construction contracts and now, of course, it’s all back-fired as Islamic State runs amok and refugees risk life and limb, on choppy seas, to reach Europe.
In short, there is plenty to be concerned about; and that common theme running through most episodes of the X-Files has returned to haunt us – ‘trust nobody’.
I am constantly wracked with suspicion over the motives of the British Government, the European Parliament, whoever is in the White House and, lately, the World Trade Organisation.
It has been made abundantly clear that bestowing ‘market economy status’ upon the Chinese will be disastrous for the global steel industry and the livelihood of those employed by it. And yet, an online report by Reuters has confirmed my worst fears.”Although fierce debate is raging, all signs point to the EU accepting China as a market economy after December 2016.”
Why is it that Chinese steel companies are not bothered about making a return on capital? Because they can rely upon the support of the state. Tata Steel UK, of course, isn’t so lucky because the government’s hands are tied by EU state aid rules – meaning that it will sit idly by and do nothing. Disgraceful.
China has been ‘top-of-mind’ for the global steel industry for some time. Visit any conference anywhere in the world and somebody will be talking about China. My last leader was all about China. I’ve spent time in BBC radio studios – even on the day of Xi Jingping’s official state visit to the UK – discussing ‘the Chinese problem’ and the resulting job losses in Redcar, Scunthorpe and elsewhere. It’s a never-ending story, but now there’s a new kid on the block. He’s been lurking in the shadows, waiting for the right moment to strike. That kid is called ‘Market Economy Status’; the Chinese crave it and if we’re not careful they’re going to get it.
I worry that governments around the world sit back and do nothing, preferring to watch the growing tragedy of a situation unfold before taking decisive action. Look no further than Syria for proof.
I have a sneaking suspicion that the British Government will do very little for the ailing UK steel industry – preferring instead to curry favour with the Chinese over nuclear power rather than work on a solution to avoid further catastrophe for British steel. I am concerned that the EU is piling regulation upon regulation on its foundation industries and, far from creating a level playing field (craved by western steelmakers) are moving towards the complete opposite situation.
And now there’s ‘market economy status’ for the Chinese, something they simply don’t deserve. Granting it would be disastrous as it would open up the floodgates to more imports of cheap steel.
Nobody can accuse the steel industry – particularly the American steel industry – of not making its feelings known.
Following on from an open letter earlier this year, nine steel associations, including Eurofer, the AISI and the Steel Manufacturers Association have recently issued a statement expressing concern over China’s attempt to gain market economy status in December 2016 – just over 12 months away (see page 9).
My worry is that the powers that be are simply not listening; they don’t want to listen. They appear to have their own agenda and, oddly, it always seems to be detrimental to the interests of those who have the best interests of the countries concerned at heart. Don’t be too surprised if, by next Christmas, the WTO regards China as a fully-fledged market economy.
I would be lying if I said that you won’t be reading any more about China is this issue. China is ubiquitous. Our Japan Update on page 13 carries the headline China Shock Increases Uncertainty. On page 21, the conference report from Brazil notes that China ‘dominates the agenda’ and that’s probably it if you ignore the aforementioned News Focus article (page 9) and some of the answers to questions in this month’s Perspectives Q&A feature by ABB’s Christer Skogum. It goes without saying that China crops up in the news pages fairly frequently too.
China aside, there are Update articles on Latin America and India, plus an interesting feature from Global Strategic Solutions’ Sara Hornby entitled Low-Cost Steel from Low-Cost Scrap.
In addition to Germano Mendes de Paula’s conference review from Brazil, Joe Poveromo reports from a conference organised by the Society of Mining Engineers and the Canadian Institute of Mining in Minnesota, USA, and from Metal Bulletin’s 21st International Iron Ore Symposium in Vienna.