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What's New at Berlin
May 11, 2001
 Dear colleagues, customers and suppliers:
It's hard to believe how far we are into the year already. It seems like only yesterday that the Federal Reserve Board surprised everybody in January with a pre-meeting rate cut and now here we are today with the Fed having reduced the rate by 2 full points. In an inventory intensive business like ours, the rate cut has a large and positive effect. The rate cut felt especially good in light of the fact that as a result of the manufacturing sector slowdown of the second half of last year, our inventories climbed above where we like to have them. We made the appropriate adjustments to our purchasing patterns and are seeing the inventory return to acceptable levels. Personally, I think the rate cuts that Greenspan has engineered have gone a long way in maintaining the confidence that consumers and businesspeople have in the long term health of the U.S. economy. The retail sales figures for April showed an increase of 0.8%, a larger increase than anyone was expecting. That might have the effect of moderating any move the Fed was thinking of making at the upcoming meeting on the 15th of this month, we'll see.
In the steel market, the small decline in consumption and the global over supply are still combining to keep commodity prices depressed worldwide. Even with the victory of the US mills in the Hot Rolled anti-dumping cases and the closure of Trico and LTV's Cleveland west side works, Hot Rolled prices haven't seen much of a recovery. Steel imports have shown a huge decline (about 30%) in the first quarter of this year compared to last year, but this hasn't seemed to help much either.
The US mills are in trouble, even the best aren't doing well financially. Most of the mills, integrated and mini, are lobbying hard in Washington for a Section 201 action. For those of you who may not be familiar with what this is, it's essentially an act by the President that can set any limits on any country on any kinds of steel they would be able to import into the country. It's being presented as a "time out" on imports, a chance for the mills to catch their breath and deal with the global supply situation. They're presenting this to the White House as something they need immediately to survive. In my opinion, there's no question the mills need help. But I have several questions. Is a 201 action the kind of help that's best for the industry in the long run? Will this action cause more harm to steel consumers and end users than the help it provides to the mills? Are there better ways to help the steel workers than by giving "import protection" to the marketplace? Is this something the government should be involved in? Hopefully, those with the power to make the decisions should think this through very carefully before taking any actions, the consequences of which are complicated and potentially dangerous to the future economy. Personally, I think that the interests of the people who buy the steel, the steel customer, the steel user, should be what is protected first. If the manufacturers who buy steel move their operations overseas to take advantage of lower cost steel made elsewhere, the US steel mills won't have anyone to sell steel to. If the customers are encouraged to remain, and given the support they need to remain healthy, well then, the mills will always have someone to sell steel to.
I haven't followed the financial results of the overseas mills too closely, though I do know that Corus, the combined British Steel and Hoogovens (Dutch) have lost a lot of money in the last year or two. The mill consolidations around the world still continue. The announcement a few months ago of the merger between Usinor, Arbed and Aceralia to form the largest mill in the world was followed not long ago by the announcement (long rumored) of the merger of Kawasaki and NKK, two prominent Japanese producers. This merger will create the 2nd largest mill in the world, if you count National Steel's capacity (majority ownership by NKK) into the mix. Everyone is still waiting for some major announcement of merger or acquisition effecting a major US mill. AK, Allegheny, Bethlehem, Wheeling-Pitt, Weirton, all are rumored to have been having serious conversations with other parties. It's something that's certainly needed, we'll see if the pension, health care, union and environmental obstacles can be overcome.
At Berlin Metals, we continue to add new customers and to make improvements to our processes. Our recent QS 9000 and ISO 9002 certification continues to pay dividends not only in opening doors to new customers, but in providing an effective method of continuous improvement. Our VP Operations, Bill Vaughan, and his colleagues Bob Thompson, Plant Manager and Rick Hinton, Quality Manager, recently finished a several month process of attending Lean Manufacturing instructional sessions off site. We're beginning to implement many of the ideas and concepts they learned, a process that will enable us to be more efficient and more responsive than before. After 34 years in business, we know that you can never stand still. If you don't change for the better, the competition will. Our goal is always to be the best because that's who companies want to do business with.
Hope everyone finds time this summer for vacation with friends or family.
Best regards,
Roy Berlin
Rberlin@berlinmetals.com
Other Newsletters:
July, 2006 July, 2005 March, 2004
September, 2003 January, 2003 April, 2002
September, 2001 January, 2001
August, 2000 April, 2000 |
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