Steel Magnolias

March 22, 2004
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The state of the steel industry locally would bring tears to ShirleyMacLaine’s eyes.

At least, that’s the way it looks judging by the somber comments made in the report this month from the National Association of Purchasing Management Greater Grand Rapids Inc.

BrianLong, CPM, tracks the economy from the purchasing aspect and he doesn’t have much good to say about steel.

“Since last month, there is still no positive spin on steel. Indeed, some steel distributors are warning that prices for some grades of stainless steel and cold rolled steel may double by late summer. To make matters worse, petroleum products in the form of natural gas, chemicals, plastic resins and fuel continue to escalate.”

And that led Long to voice other concerns.

“Although there is still no evidence that industrial inflation is about to spill over into the consumer sector, we have to consider the possibility that runaway inflation could halt the economic improvement we have experienced in recent months.”

As KeithJackson would say, “Whoa, Nellie.”

What about all the “good” news that’s creeping out of boardrooms? Isn’t Herman Miller looking up? Isn’t Gentex enjoying the fruits of a new European location? Isn’t the banking community still going great guns?

Well, yes. But at the end of Long’s report he includes anonymous quotes and statements from those he is surveying.

And the outlook, at least in terms of steel, is grim. Here’s a sampling of what they’re saying about steel:

“The steel supply shortage may slow down shipments. Prices are out of control and causing many problems with selling our products. Steel shortages could stall the recovery in manufacturing.”

Here’s another: “The rising steel prices are affecting lead times and availability.”

And yet another: “This is a time to panic. The steel situation is out of control. There is talk of shortages in April and May. The base price of hot rolled coil steel has risen 60 percent since September. The ripple effect of the steel price increases will touch almost everyone who reads this newsletter. It is a runaway train. This could have widespread consequences for all of us in manufacturing.”

“The steel industry has a chokehold on everyone. What will this do to inflation and the economy?”

The news is much the same on the other side of the state.

In last week’s Crain’s Detroit Business, the banner headline was this: “Suppliers Steel For Disaster.”

The premise was that top-tier auto suppliers were worried that steel prices would ravage their supply base and cause industry-wide production shutdowns. The little guys, many of whom are paying 30 percent to 50 percent more for raw materials than they were six months ago, would take the hit first.

“We’re heading for a cliff, and there are going to be shutdowns,” LarryDenton, CEO of Rochester Hills-based Dura Automotive Systems Inc. told Crain’s. “With small parts suppliers, you can only squeeze them so long. This is the only story in the industry right now as far as I’m concerned.”

And statements like that should be of concern to everyone in West Michigan. Will steel prices be the kryptonite that brings down manufacturing?

  • Here’s a fresh economic perspective. The vice president and chief economist of First National of Chicago, Alan Reynolds, says some political figures seem to be trying to sell an economic inferiority complex by yammering about the “exportation” of American jobs.

He recalls the same rhetoric was exciting DanRather, PeterJennings and TomBrokaw a decade ago. But Reynolds argues that then, as now, the decline in U.S. manufacturing jobs is part of a worldwide phenomenon that happens to affect other countries far more profoundly.

A decade ago, he said, everybody assumed the jobs were “going” to Japan and Germany because those countries also happened to be exporting more commodities than they imported

But he said the facts show the assumptions were wrong.

“From 1990 to 1995, manufacturing jobs fell by 1.6 percent a year in Japan and by 4.2 percent a year in Germany, but only 0.6 percent in the United States. From 1995 to 2000, manufacturing jobs fell by 1.9 percent a year in Japan, by 0.8 percent in Germany but only 0.1 percent in the United States.”

“From 1990 to 2000,” he added, “industrial production increased by 49.5 percent in the United States, 13.4 percent in Germany and 1.5 percent in Japan.” As of 2003, he added, Japan’s industrial production index remained much lower than in 1990.

And that disparity in growth, he said, is what gives the false appearance of trade imbalances with the two countries.

“Trade surpluses appeared in Japan and Germany,” he added, “only because their economies — and therefore their imports — grew slowly, not because exports grew rapidly.

“Japan’s merchandise exports grew by only 3 percent a year from 1990 to 2001, slower than Europe’s 4 percent pace and only half as fast as the 6 percent yearly increase in U.S. exports.”

  • Well, the above would be “news” to area manufacturers. In fact, it would be a great topic of discussion at … the Press Club.

That’s right, that bastion of free speech once again is kicking up its heels. Business Journal Editor CaroleValade and DirkKoning, of the Community Media Center, are helping to organize the resurrection of the club for journalists, media types, PR folks and other assorted hangers-on, which will be located within the University Club on the 10th floor of the Fifth Third Bank Building.

Last week’s Broadcast Day open house provided a steady stream of media from Clear Channel, WOOD TV8, FOX, WZZM TV13, Regent Broadcasting, WGVU-GVK and Community Media Center.

The TV bank is up in a custom-made cabinet, with flat-screen televisions marked by media member stations’ letters and numbers, and a working press laptop area will be installed by month’s end. And the signs are on the walls.

For membership information, call 456-8623. The price is reasonable, even if the clientele is suspect.     

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