Demand for steel is collapsing, but China keeps producing it. Already high trade tensions will increase. 
Too Much Steel in China Means Trouble for the World
Bloomberg reports Too Much Steel in China Means Trouble for the World
When it comes to steel, China is king, producing more than 1 billion tons a year, well over half the world’s output. But now it’s wobbling. And just as it shook the global industry during its rise to become the metal’s super-producer, a decline from peak steel has the potential to be no less turbulent.
Quite simply, a domestic construction slump means there’s too much steel and too little demand. For the rest of the world, the fear is that it will become more of a dumping ground for excess product, cutting prices, driving plants out of business and putting workers out of jobs.
That would add to the economic challenges facing the world right now, particularly in Europe where Germany is set to barely grow at all this year. The US has ramped up protections for the industry, but any perceived threats could still become political issues in the presidential election given steel’s importance in swing states like Pennsylvania.
In Europe, where steel demand was already anemic, Germany’s Salzgitter AG cited excess capacity and Chinese exports when it reported a first-half loss this week. The Economy Ministry told Bloomberg it’s monitoring the situation and noted the “tough international competition.” ArcelorMittal SA, Europe’s top steelmaker, has made similar criticisms.
“The warning from China indicates that our fears are now materializing,” said Martin Theuringer, a managing director of the German Steel Association. “It’s about resilience. The overcapacity is jeopardizing the profitability and sustainability of the industry here.”
The last steel crisis in 2015 and 2016 sparked a political firestorm in Europe and the US. Donald Trump centered much of his 2016 election campaign promising to defend the US from cheap Chinese imports, while lawmakers across Europe scrambled to protect their domestic industries.
China’s scale means that even the smallest ripple in domestic demand can cause tremendous damage when it overspills. Its exports were as big as all of North America’s output in the first half, and are on track to reach about 100 million tons this year.
That’s been fueled by a slump in domestic prices that makes it more profitable to ship some steel overseas. Hot rolled coil — a benchmark product — is shipping from China at its cheapest since 2020. Global prices, which typically lag China by 2-3 months, are also at multiyear lows.
There is no demand in China for steel but China is supposedly on pace to grow 5 percent.
As China tries to cram cars and steel into the global economy instead of working on internal demand, things are going to get interesting.
Who is winning? West or China?
West is killing Russia and China with scarcity ( sanction ).
China is killing West with abundance.
The world should appreciate China.
China is helping the world in this inflation environment.
If you need it, use it. Its cheap.
If you don’t, leave it.
Simple.
Or buy expensive steel from somewhere else.
Problem solved.
of course fascist merika will just throw tariffs on material we could use via deflation
I paid $100 for 20′ stick of tube steel
wanna know why stuff costs so much??? tariffs
now dirt nap joey slapped additional tariffs on Canada(our friends) soft lumber
was 8% now 14%
Just dump that cheap steal on North America, Europe and Australia like the South Koreans did.
Can’t they just build more ghost cities?
Why not just use it to manufacture millions of autos … and dump them in parking lots and count them as sold?
They already know how to do this — just Rinse Repeat.
WAR WAR WAR
China is preparing for WAR, this will help them for repairs and new battle weapon systems..
Hmmm… war…. in a globalized world… with complex global supply chains…
I am thinking … nope
China will build military equipment.
Nippon Steel is in the likely process of acquiring US Steel. Does this mean that Nippon would then be considered a USA producer meaning it could circumvent assorted tariffs and or other regulations? An even more interesting possibility would be Nippon buying steel in the open Asian markets and then transporting it to the USA as a supposed Nippon constructed product. So many possibilities and don’t be surprised that at the end of the day a lot of that Chinese steel ends up in the USA
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A whole lot of american infrastructure needs renewed/rebuilt/replaced. Most bridges date back to between turn of the 19th century and late 1960’s. Do we have the US steel to rebuild with?
Why does the U.S. no longer repair/rebuild infrastructure? A whole lot of well paying construction jobs that would redistribute the wages throughout the economy much better than a big bank bailout and probably cheaper.
These days the USA prefers to invest in welfare and other assorted entitlements rather than infrastructure. For example bridges don’t vote but food stamp types do so spend more on food stamps is the politicians objective
Welfare and warfare.
Warfare makes neocons rich.
Because politicians like to build new.
So what is Europe going to do?
What they always do, devalue the Euro to remain in the game or face huge populist opposition to the rulers of Europe. Couple that with some form of protectionist actions such as Tariffs or import quotas.
Only thing missing is Madame Lagarde led by an underling first from ECB announcing that everything is cool once again in Europe and so they can start easing.
When China does not buy from Europe as their population has too much Debt then Europe will no longer need much from China.
Will be listening to what is offered at Jackson Hole.
Leaders of Fed, BoE, ECB, and others meet and discuss the outlook ahead.
Powell not in a position to trash talk USD like Bernanke or Yellen.
But for Lagarde going to be hard and talk the straight and narrow.
The minicomputers competed with IBM, until AAPL destroyed them around Boston.
At the same time mini steel co competed with USSteel. The minis used scrap. They melted steel in small chambers. Their output was small and efficient. Cost was 20% lower. The integrated retreated, fought with the unions, until they shut down and died.
The workers sat in the streets of McKeesport outside USSteel plant stunned.
China got the crumbs.
The rusty skeleton of USSteel in Johnstown PA is still there. The flourishing town was destroyed. Johnstown forgotten people voted for Trump.
Minicomputers were mainly UNIX based (open system) which ran on mainly platforms and VAX which was owned by DEC (then purchased by Compaq and finally HPQ). Not sure how you through APPL into that mix. Minicomputers definitely drove migration from mainframe. Eventually as desktop like power grew (multi-CPU intel systems) the line blurred between mini’s and powerful cheap intel based servers running SCO UNIX/XENIX etc.
Massive overcapacity of steel, RE and people, especially elderly. What will China do? Most of China debt is to themselves. Most of US gov debt is to ourselves, to the top 1%. China wrote off debt and blew up buildings. TLT and commercial RE massacred the top 1%
China will do … whatever it takes… to fend off collapse for as long as possible … as will the rest of the world (see the debt explosion in the US… that’s fending off collapse)…
But eventually it will all collapse — there is no way out
But..but..but, if China dumps its steel, we get a lot of steel for a low price; it spurs uses of that steel for manufacturing, building, and who knows what else. The ossifying U.S. steel industry collapses to rise again, leaner and meaner.
Not sure if you are sarcastic, but I agree
”Would you rather be a dumper or a dumpee?”
Milton Friedman.
Dumpee is his answer… and mine.
Steel, if properly treated, makes for great systematized housing, that can also be reused again and again, and recycled. Also a great way to reduce the cost of construction.
If people wanted to live in “systematized” housing, they already would.
I think he meant standarized designs, free standing, like most steel built shops and barns. at least I hope thats he meant.
Steel Doomsday Bunkers?
Go with 3ft thick walls… that should use up the surplus
Sell some to Biden/Harris for Windmills I would guess…
Windmills are fiberglass and fairy dust mostly..
I agree, and have always wondered how they can be so damn heavy…
“For the rest of the world, the fear is that it will become more of a dumping ground for excess product, cutting prices, driving plants out of business and putting workers out of jobs.”
Sounds like when American factories shut down and moved production to China. Left the Rust Belt in its wake.
Didn’t China do this with Copper back awhile?
China had the same problem in 2015. They increased regulations to restrict steel production and boosted domestic demand through big infrastructure projects.
This time they cannot boost domestic demand as easily, as they don’t need much more infrastructure. They also increased iron ore prices back in 2022 without much effect.
They are going to have to force the least efficient mills to mothball production or let them go bankrupt on their own.
In the meantime, if anyone needs to stockpile some low priced steel, and can afford the carrying costs, now is a good time. Though it is difficult to do, if your government is putting big tariffs on steel (US, India, Mexico, and others).
Sounds like the same decisions American steel companies have had to make over the last 30 years. It’s good to see that China is struggling with the same sorts of issues.
China has an unemployment problem. 300 million migrant workers are not building high rise apartments anymore. Youth unemployment is 17%. 2.6 million coal miners are largely redundant. Dictatorships are unstable and prone to revolution under the current circumstances. Many Chinese lost their life savings in bank defaults and the high rise ghost city real estate collapse.
The peasants are getting fed up with their Masters… seen this over and over throughout the centuries of mankind’s existence.
Yes, 300 million migrant workers all have cell phones. They make one heck of a flash mob.
We all should see it, as America is the “Test Bed” for this sort of chaos, isn’t lt?
but the forbidden city owns the cell phone network. A total blackout is available at the flip of a switch. With online banking a whole lot of folks will become docile quickly as their bank accounts get frozen.
The velvet prison is merely a facade over a deadly steel bear trap.
That somewhat recently happened in Canada with the Truckers, and I must say, things did get quiet for quite awhile.
However, there are always consequences to your actions, when you piss off enough of the populous. Sometimes it takes a while, and sometimes it’s all at once…
Sure do, and flash mobs of 100’s are somewhat frequent these days, are they not?
I laughed, and shouldn’t it’s wrong but face palm stuff is hard to fight off, when I saw in CA. Where Newsom had literally just signed off a new law to assure this would end, as they were showing Video of flash mobs roaming around, at practically the same time…
Really? I heard that China collapse again and again for over 20 years or more.
Yes, you’ll be right one day.
Try more.
Don’t be disappointed.
I know Mish doesn’t like tariffs or sanctions, but the next president has to do something about the fentanyl / drugs crisis. Obviously, there’s no one thing that’s going to solve the problem, but since China is at the root of the crisis, then some sort of anti-China step(s) must be taken. Hitting China’s steel industry may need to be looked at. We need a president who’s going to lead and take decisive action on big issues. There are no easy answers here outside of shutting down the border which is a no brainer.
Make drug dealing a capital offense.
Including weed
Drug abuse is a self correcting problem, no need to waste resources on crimes of distribution etc. rather focus on driving under influence,public intoxication, etc. a black market or a government market will always exist as we cannot outlaw human desire for intoxication.
best to build a societal structure to contain, educate and help those who can be helped.
California is a prime example, there should wholesale arrests and migration of homeless who are primarily drug abusers, into work camps in the forests etc. Clean up the trash in the city, clean up the dead wood in the forests, cut fire breaks, replant to stop erosion etc.
The workers get paid into an account they can’t access until their sentence is up. They get dried and drug free, the state gets its forest etc cleaned up, and the homeless get relocated out of their network of drugs and crime, and maybe learn some new skills.
Win,win, win and it keeps the jails empty for violent criminals and politicians or am i being redundant here?
There are solutions, there is no political will for solutions- this usually indicates someone (or someones) at the top are reaping big rewards monetary or political/graft/influence, etc.- with the status quo..
it would also provide a means to separate the mentally ill from the rest of the homeless and get them into treatment which is another win/win.
Drifting here from the OP:
The latest drug crisis has been manufactured by government and since the people running the country blame others while not using solutions to minimize the problem we now have millions of people that are non functional in society and the people locked up are completely nuts waited to get released. It’s going to get worse look who’s running for elected office they don’t do shit.
“..the next president has to do something about the fentanyl / drugs crisis.”
“Hitting China’s steel industry may need to be looked at.”
Now aren’t we being logical………..
What about “hitting Italian leather factories” in order to “do something” about the “obesity crisis?”
Instead, what the next President would have to do, in order for doing anything beneficial for Americans to even be remotely possible, is to copy Jefferson: Barely, if at all, even being aware that there were a strange place out there called China.
Awareness of such an; for the government of a country halfway around the world aspiring to be somewhat free; irrelevancy as China’s existence or not, never was,and still is not, one of legitimate government’s enumerated powers. For good reasons. OTOH, it is running around like retards “hitting” someone; which is exactly why America is, by now, no longer anything more than some annoying, increasingly irrelevant third world basket case with no industry, no technology, no ability and no utility. While China; despite being a communist basketcase in absolute terms; is at least a few hundred percent superior in effectively every single area. And with the delta growing fast and faster.
Stuki,
Let’s stay on track here,okay? Limit the discussion to drugs / fentanyl and don’t go off task. Fentanyl is an illegal substance, unlike Oreos. Both are bad for you, but one takes hundreds if not thousands to kill you. China provides the pre-cursor materials & machinery to mix them. Taking decisive with regards to China action is needed which is all I’m saying. Note that I’m mostly leaving out the how which is certainly up for debate.
“China provides the pre-cursor materials & machinery to mix them.”
But only because China by now provides every.single.thing cheaper, better and more efficiently than anywhere else.
Anyone anywhere can trivially supply everything needed to manufacture fentanyl. It can be done by basement labs in remote jungles. Staffed by junkies. Quadruply so at the non-existent purity requirements of the street drug market.
Nuking China into a glowing crater, will have zero effect on fentanyl availability in America. At least directly. (Indirectly, nuking China will pretty much shut down the US, since everything we consume originates there, resulting is mass die-offs over here. Which I suppose will put a dent in fentanyl demand hence supply.)
its not that there is no technical development in the USA, its just most of it gets funneled into the military/industrial complex for the war machine and civilian industries stagnate with patents being blacked out by the war machine. The cold war was a great ruse to take over the government and classify every crime and every assset worth stealing.
That’s true.
There’s technological development in US academia and dedicated labs. Even some smaller startups, even though that is getting rarer as costs have gone through the roof due to the policy of converting once-was “Silicon” Valley into “Realtor” and “Ambulance Chaser” and “Investor” Valley.
But, due to current costs of keeping the various negative-value-add leeching classes; realtors, ambulance chasers, “investors” and “asset owners” in splendor despite them contributing nothing useful in return; what does NOT happen here; is development of means of producing any technology competitively.
The $2K toilet seat crowd in the MIC don’t care: Others are being forced; at gunpoint; to pay for what they want anyway. Hence why they can still appear to be part of an “advanced” society.
But for ANYONE else; who faces ANY form of competition; every industrial and technological once-were-stronghold in the US, is rotting at a pace best described as a collapse by now. Nothing new is done here. Every single project attempted done here, ends up hitting a wall. Followed by frantic calls to obtain first one thing, then pretty soon everything, from Asian suppliers. With the only thing left done in the US, is silly rah-rah marketing insisting “we” are still needed to “design” the thing “in California.”
As if anyone even half sentient cares anymore. Already in mobile phones and BEV cars, and soon in near everything: “Chinese”, “Designed in China”, “Made in China” by now carries similar connotation as JDM does among sporty compact cars, rice cookers, tools, optics, instruments and other stuff: It’s where the best, highest quality, most advanced and most cutting edge comes from.
America still has leading brands, like Apple and Google. But they all result from dominance until 20 years ago. And are now kept alive by network effect advantages established in an era when the Valley was still mainly about “Silicon.”
I strongly suspect the fentanyl crisis is China getting back at the west for the Opium Wars in the mid 1800s, and the destruction of their culture, culminating in the fallout of the Boxer Rebellion.
We tend to forget China is one of the world’s oldest cultures.
I concur, though Britain was the primary dealer through the East India trading company. FDR’s grandfather was a ship captain that transported Opium from India to China, thus making the family fortune. So some Americans were involved as well.
Well they got Hong Kong back, and now they are using the club that was used to beat them, to beat the rest of the world. Fentanyl is a nasty business with a heckuva of profit margin or mark up from mfg to consumer.
From a historical standpoint, sure, nowadays it’s about weakening the US.
The logical area for China to expand into is guns, tanks, ships..Perhaps a bridge to Taiwan..
Sinking excess capacity into military buildup is, unfortunately, most often what ends up being done. And then, predictably, this buildup ends up needing “justification”…..
Hence why the US is stuck with carrier groups. With the attendant “need” to constantly come up with something for them to do in order to “prove” their “necessity.” And why idiotic “sanctions” on Russia over Ukraine only served to increase their arms production. No doubt the same wasteful dynamic will play out in China, now that they’re “on top.”
maybe they will use it to build a wall to keep the barbarian Caucasians out?
an 8 lane expressway to Taiwan?
high speed rail to the north face of Everest?
a canal and pumping stations to move the floods of the Yangtze to the deserts of the north? They are a bit short on arable land, the Gobi is instant paradise, just add water..
There are other risks besides steel dumping hurting foreign steel mills. What about the risks to iron ore exporters such as Brazil and Australia? And then there are secondary and tertiary problems from a slump in steel as a drop in iron tonnage and prices means for example that those dependant on supplying services to the iron ore miners also suffer and that flows threw to those servicing those suppliers. Plus governments such as here in Australia rake in billions in mining royalties and tens of billions in corporate taxes on profitable miners and service suppliers.
Australian economists are worried about a $3Billion loss of Iron ore and coking steel exports as China starts to slow down.
That would be coking coal.
Figure seems too low. Australia exports about 2 million tons of iron ore every single day and this is greater than the exports of the rest of the planet. Worth 91 billion USD annually so only a 3% drop in prices would cost 3 billion just for the iron ore if tonnage maintained. Add in losses on exports of metallurgical coal exports and that figure rises. Plus any tonnage list is the same as a 100% drop in price for every ton not exported.
A major China steel recession would have tonnage drops of several hundred million tons of iron ore and prices more than halving so the lost exports would be possibly 60 billion USD annually just for the iron ore. Plus if demand for steel slumps so would demand for all metals. Bad for Australian alumina miners, bad for Australian nickel miners etc. So a loss in total exports could exceed 100 billion USD.
The only silver lining would be my stack of gold and silver would rise in AUD as the AUD collapses and a major recession would make housing cheaper here making it possible to buy a nice house for a few thousand ounces of silver.
2 million tons per day is a whopping amount. I thought this couldn’t be true, but you are correct. I guess those trains that are 2 miles long are hauling nothing but iron ore. Australia will definitely take a hit when China steel production slows down.
No flies on you, Mate. Ain’t the Perth MInt great?
Mind you, once the dust settles, the world will need its metals.
Hope you are right about the silver. It would make my 14Kg of pre war Silver coins more attractive.
As far as houses. Just sold mine in the sticks at the Sunshine Coast. Sold for $200K over the expected price. Too a Tradie couple. But now they have room to park their giant outback caravan, giant boat, jetskis, tradie utes and trailers. House was your average 4 bedroom on a 1000CuM block.
A nieghbour just bought an investment house – an average 3 bedroom family house in an estate. He’s an electrician, wife’s a council office worker. Bank gave them a Million buck mortgage – no problems.
Is this about massive under consumption of steel in China?
Brought to you by Janus the god of indecision.
Partly. China is running out of big domestic infrastructure projects that gobble up steel.
But it is also about too many Chinese companies still expanding production. It’s similar to the way the US oil industry used to keep expanding production in the face of falling prices. A self-defeating strategy that they have now reversed. Better to throttle production until prices come back up. Now, the US natgas producers need to learn the same lesson.
The problem is that I won’t throttle my production until after you throttle your production. I also don’t want to get involved in American anti-trust litigation.
There are still plenty of steel producers outside China. Precious few of who can match even middling Chinese producers for efficiency. Many/most Chinese producers, can continue to operate profitably at prices which will force producers elsewhere to shut down in not too long. Unless the rest shape up and match Chinese efficiency, it is them who will have to do the throttling. Not the Chinese, who have already been forced to become lean and mean by their huge and insanely competitive domestic market.