 |
| AEC Past Chairman Duncan Crowdis |
Over the past several years, each of us in the industry has
had to assess and decide the role we felt compelled to play in this long-term
battle for fair trade. In doing so, a question that constantly comes up: “Is my
business being affected by this onslaught of imported Chinese extrusions or not?”
While it is a simple question, finding the answer isn’t
always obvious. There are two avenues to find the answer to this question. One
is being able to put your finger on specific business--that either left when
the imports were escalating or came back once the duties were applied. The
other would be to assess the overall impact to your business as the industry absorbed
the huge level of imports in 2009 and the early part of 2010.
The first is the easy one. If you can put your finger on
specific bits of business that either disappeared when Chinese imports were
escalating dramatically in 2009 or, conversely, if you can identify specific
bits of either returning business or new business that “came back home” once
the preliminary tariffs were announced in late 2010, it is easy to quantify. However,
I have got to tell you that identifying directly affected business isn’t always
that straight forward. To start with, our customers or prospects won’t
necessarily throw out the fact that they are asking for a quote because their
Chinese source has dried up.
The second way to assess the impact of the imports and
subsequent tariffs is more difficult and requires more digging.
The question
here is:
“When 600MM lb. per
year of domestic production and capacity is replaced by imports, what is the
impact on the overall industry and, therefore indirectly, my business?”
This is the more important question to ask. Imports in 2009
escalated from a very low number to a rate of almost 600MM lb/year in just
under a year. There is a good chance that there wasn’t time to dramatically
affect your specific business. But think about it – with this volume of your
competitors’ capacity taken away, how long would it take to eventually impact YOUR
business in a negative way?
During the original investigation conducted by the U.S.
International Trade Commissions (ITC) on whether the domestic industry was
being injured by imports, the ITC found that:
- Chinese imports, by the early part of 2010, were at a level that was equivalent to nearly 19 percent market share
- Chinese imports were priced at levels up to 55 percent below U.S. domestic producers for the identical products
- Chinese prices over the prior 3 years dropped 44 percent versus only 27 percent by the average of the U.S. domestic industry
When the ITC assessed the material threat that this
predatory pricing could have on the U.S. industry, they found that:
- The Chinese domestic industry was extremely export oriented
- Forty companies had expansion plans in place and were active which would add a total of 10 billion pounds of capacity.
THAT’S RIGHT – 10 Billion pounds. This far
exceeds current domestic demand in China or any anticipated growth in future
demand. To put this number in perspective, the capacity of the entire U.S.
domestic industry is only about 5 billion pounds at most!
Is there any real question of the intent of the Chinese
extrusion industry? China can’t afford NOT to export their products and the
government can’t afford to allow these facilities go idle (that would create a
political hot potato with unemployment). With duties in place in Canada and
Australia, their largest target market is clearly the United States!
So, as you are assessing whether Chinese imports have
affected your business, it is critical that you think about these facts and
think about the following:
- It is inconceivable that anyone in our industry will be totally isolated from the impact of the onslaught of Chinese imports.
- If the Chinese re-enter the market, competitive intensity will increase as domestic extruders--with 5 billion pounds of capacity to fill--fight over an increasingly smaller piece of the pie. Remember, the Chinese were at over 20% share in the U.S. before the duties were enacted. The history of the Chinese is to leverage exports to dominate and totally absorb domestic industries; there are many examples. Where are the U.S. textile and furniture industries today? Let us not be another historical statistic!
- The saying that “a rising tide floats all ships” applies in this case.
If you are a supplier to the U.S. domestic aluminum
extrusion industry, the impact this will have on your business is as serious as
it is to an extruder – perhaps even more so.
If you are thinking that your business model is so strong,
so unique or is serving such a niche that the Chinese will never touch it--that
you will never be negatively affected in a significant way--then with all due
respect, your view is too short term and missing the big picture.
The risk is enormous and the eventual outcome is not pretty
for any of us… unless we stay the course and fight this illegal move into our
markets,.
The first thing you need to do is a conduct your own
assessment. Think of the points I have raised, do your own research so that you
are knowledgeable. And then you MUST do what you do every day in running your
business–make a decision.
As an entrepreneur and business owner, I encourage you to
take matters and the future of your business in your own hands. Join the AEC in
the fight for survival and, in the real goal, to build a strong and more
vibrant future for us, our employees and all of our stakeholders.
FAIR TRADE: It Matters!
To get involved contact Rand Baldwin, President of the Aluminum Extruders Council.
Comments
Post a Comment