Steel, a leading indicator on the economy, could be turning negative

Steel goes into buildings, appliances, and cars. That makes demand for steel a leading indicator for the economy since companies order steel in antipication of rising sales of their own products.

This summer global demand moved up and so did prices. In  August a metric ton of hot-rolled  steel went for $600 to $620 a ton. Rising steel prices on rising demand provided a sign that the global economy was headed for recovery.

Now prices have dropped back to $570 a ton, according to World Steel Dynamics.

Does that mean that we’re headed back towards recession again? Read more

Brazil adopts a China-style industrial policy–and the target is China

The Brazilian government has told Vale (VALE), the country’s largest iron-ore producer (and either No. 1 or No. 2 in the world) that it has to do more to build up the Brazilian domestic steel industry rather than just selling iron ore to Chinese steelmakers.

Sounds like a page right out of China’s book of industrial policy. Designate strategic economic sectors, that manual reads, and then develop domestic champions in that sector.

Vale is now exporting record amounts of iron ore to China, the world’sbiggest steel producer. At the same time, Brazil’s budget minister Paulo Bernardo said, in the first six months of 2009 Brazilian imports of flat-rolled steel climbed 26% from the first half of 2008.

In the second quarter of 2009 68% of Vale’s iron ore shipments went to China.

“We cannot be one of the biggest ore producers and ship it all abroad and end up importing steel,” Bernardo said.

Did Vale push back? Did the company say, If we’re really good at producing iron ore–and the company is the world’s low cost producer–then that’s what we should do? Did Vale tell the Brazilian minister to go re-read Adam Smith? Read more