Here on the Iron Range one cannot escape the talk of impending layoffs at area iron mines. You also can't mistake who company officials and unions alike blame for this situation: foreign steel dumping.
"Dumping" means foreign companies, sometimes as extensions of foreign governments, sell steel for less than it costs to produce, just to move it off their shores. Usually their motivation in doing this is to keep their own people working during periods of low demand, an option not afforded American mines and steelmakers. The U.S. steel industry rightly describes this as unfair.
Uh-oh! This blog post just got hit by a terrible storm. Right now all the insight, analysis and facts that were going to be part of this post are strewn about the street. Windows are busted out, doors swing open. Alas, things were going so well! No one expected this!
Worse yet, here come the looters. The looters are stealing my insight, analysis, and facts. Why, they're even taking the copper from the wires of my laptop as we speak.
SO WHAT CAUSED THIS DISASTER?
Who says looters? Well, that would be wrong. Looters don't *cause* disasters. Looting is a crime of opportunity. When a disaster strikes, looters use their base instincts to seize opportunity, often out of a perceived notion of survival.
So here's what you need to know. Steel dumping is like looting -- a crime of opportunity that benefits some players in the global economy at the expense of others. But the *cause* of the steel industry disaster is bigger, more complex and harder to predict than just saying "foreign steel."
In this increasingly strained metaphor, the disaster is the unabated collapse of global iron ore prices, which hit $46.70 heading into Easter weekend. We are just $10/ton away from the bottom of the glut that shut down all the mines on the Mesabi Iron Range in 2009.
Last week, I wrote about how the iron and steel crisis was not caused by environmental regulations, but those very plummeting iron ore prices. Since then, iron ore has dropped another $9 per ton, further worsening market conditions. Steel dumping has been a flashpoint before -- in the '00s, '90s, '80s. But what these times all have in common with today is the low cost of iron ore.
The iron ore and steel woes are so bad that some financial experts are saying they might prompt government banks to explore more rate cuts, something that runs afoul of the normal strategy in an otherwise recovering economy. The great fear is that an extended collapse in steel could detonate the whole recovery. Again, however, nothing gets better for Iron Range mines until prices improve. This could take a year, possibly more.
Why are the prices so low? It's complicated, but in essence you have too much supply, slackening demand in Asia, the strong U.S. dollar that puts our exports at a disadvantage, low oil prices bottoming out the demand for tubular steel. Pray tell, who do you petition about these problems? I will sign that petition. I fear, however, it will be more of a prayer than a petition. For those with unflinching faith in markets, this is what you can expect.
There will be hard days ahead. Some of the hardest will be in realizing that most of the world, nay, most of our own country doesn't care about our hard days. They've got their own problems. Wishing and hoping won't change this. Complaining and screaming won't change this. Our unbalanced economy will suffer the disproportionate pain it's built to deliver. Only our own attitudes and actions can change.
When a terrible natural disaster strikes, there are two instincts:
1) the cold, calculating planning to avoid the same amount of damage next time.
2) the warm embrace of human beings willing to work, sweat, laugh, cry and hold each other through hard times.
The Iron Range will need both this year. Iron ore will be back, but might employ fewer people. What else can we do? No community dies if we continue to breath life into that community. Beauty, art, and humanity supply all demand, if we nurture the gardens.
The truth is sometimes uncomfortable. This fact is about the only thing on earth that doesn't change. You can attack the messenger if you wish, but know that in our economic system the price of iron ore will determine when Iron Range mines reopen, and when steel dumping ends. Nothing more, nothing less.