IN THIS ISSUE:
* ADVOCACY
Snow, Engler Comments Touch off New Currency Controversy
* RESEARCH
September Metals Activity Report Shows Higher Shipments
* MEMBERSHIP
Metals Service Center Institute Adds Two New Members
* BRIEFINGS
Short Items of Interest to MSCI Members
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ADVOCACY
Snow, Engler Comments Touch off New Currency Controversy (top)
Comments by Treasury Secretary John Snow and John Engler, president of the National Association of Manufacturers, have touched off yet another controversy related to China’s currency valuation policies.
Hopes were high that Snow, during his extensive visit to China last week, would push for faster moves by that nation to revalue the yuan and permit its value to be established freely on currency markets. Groups that support a strong domestic manufacturing sector, among them MSCI, as well as many members of Congress, are not satisfied by July’s 2.1% revaluation of the yuan, first because it falls far short of addressing the estimated 40% undervaluation of that currency, and second, because its value has remained essentially unchanged since the revaluation.
But instead, Snow’s post-meeting comments from China sounded a lot like what China has been saying, and nothing like even his pre-trip positions.
“We are here to encourage the progress, to support the progress,” he said early this week in a report published by The New York Times. “Moving toward a truly flexible exchange rate regime requires quite a large number of steps. We recognize that it will take some time.” He praised the “progress” and “commitment” of Chinese economic leaders to change.” Chinese leaders, in their comments, said what they have consistently said – that the yuan will remain “stable at a reasonable and balanced level.”
A ‘mature’ relationship
Later this week, Snow told the Securities Industry Association, meeting in Beijing, that he is “encouraged that we are reaching a level of maturity in our relationship characterized by the understanding that we are not involved in a zero-sum game, but rather a ‘positive’ sum game.”
That position is not likely to address issues raised by pro-manufacturing forces. Indeed, during the course of this week, the number of co-sponsors for H.R. 1498, the Hunter-Ryan legislation that addresses Chinese currency manipulation, rose to 135. MSCI will continue its aggressive push to find additional co-sponsors for this important WTO-compliant legislation.
Engler inflates NAM’s role
Meanwhile, Engler, in a letter to Industry Week magazine, angered pro-manufacturing forces with his assertion that NAM has “single-handedly led the fight against China’s currency manipulation…” In fact, a large coalition of manufacturing-based trade associations, MSCI among the most active of them, has pushed for legislation to address Chinese currency manipulation. NAM, in contrast to those organizations, has not endorsed H.R. 1498.
MSCI’s leadership role
“MSCI has played a huge leadership role, through grassroots town hall meetings organized by our chapters, visits with members of Congress and lobbying, in focusing attention on ways that the undervalued yuan is destroying the North American manufacturing infrastructure,” said Bob Weidner, MSCI’s president and chief executive officer. “We have been among the most persistent organizations seeking co-sponsors for H.R. 1498, which is by far the best legislation pending before Congress to address currency manipulation.
“I can’t comprehend how any organization can claim a leadership role on behalf of North American manufacturing and not support H.R. 1498,” Weidner said. “It is the only proposal that is WTO compliant, consistent with U.S. trade law, and directed precisely at correcting the undervalued yuan.”
MSCI has consistently opposed protectionism and, with regard to H.R. 1498, regards that label as wholly without merit. “We and our allies on behalf of North American manufacturing have never advocated protectionism, and we never will,” Weidner said. “We believe, however, that free and fair trade means that all parties to international agreements must fully live up to their obligations under those agreements. We also believe that the U.S., if it is serious about maintaining a vital and growing manufacturing sector, must be ready to enforce its own trade laws when there is evidence that those laws have been violated. That’s not protectionism; that’s realism.”
Weidner added that MSCI’s advocacy on behalf of North American manufacturing is not limited to affiliation with just one group. “We have worked collaboratively with a large number of groups on trade issues, and we will support any group, old or new, that embraces an authentic pro-manufacturing agenda. To do less would be a breach of faith with our members and their customers.”
Letter to Timmons
Separately, Weidner, in a letter to Jay Timmons, NAM’s incoming policy chief, reiterated MSCI’s support of H.R. 1498 and the reasons for it. “The NAM has recently shifted its position to agree that some kind of effective response mechanism is required if we are to persuade China to move to a yuan that is freely traded and thus valued by market mechanisms,” Weidner said. “We strongly believe that H.R. 1498 can be that mechanism and encourage you to embrace that solution in your policy work.”
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RESEARCH
September Metals Activity Report Shows Higher Shipments (top)
September shipments of steel and aluminum products from metals service centers in the U.S. and Canada rose in September above shipments during the same month in 2004, while inventories of those metals generally improved in both nations.
U.S. Service Center Activity
U.S. service centers shipped more than 4.6 million tons of steel products in September, an increase of 0.1% from September 2004. That brought year-to-date steel shipments to almost 41.7 million tons, or 3.1% below shipments for the first nine months of last year.
At the end of September, steel product inventories of almost 13.0 million tons were 12.9% lower than September 2004 and down 3.1% from August. At the current shipping rate, this represents a 2.8-month supply of steel in inventory, down 13.0% from 2004 and up 5.3% from August 2005.
Aluminum product shipments rose 6.5% in September, to 107,900 tons, while shipments for the first nine months of 2005 of 905,600 tons were 7.3% higher than during the same period of 2004.
At the end of September, aluminum product inventories, of 357,600 tons, were 6.8% higher than in September 2004 but down 2.7% from August 2005. At the current shipping rate, this represents a 3.3-month supply, an increase of 0.3% from a year ago but a decrease of 6.3% from August.
Canadian Service Center Activity
September shipments of steel products from Canadian metals service centers rose 6.9% compared with the same month a year ago, to 374,200 tons. For the first nine months of the year, steel shipments declined 5.6%, to about 3.2 million tons.
Steel product inventories of 1.0 million tons at the end of September were down 4.1% from the same time in 2004, and down 4.2% from August 2005. At the current shipping rate, this represents a 2.7-month supply, down 10.3% from a year ago and 8.4% from last month.
Shipments of aluminum products of 10,500 tons were 3.7% higher than during September 2004. Year-to-date shipments of 87,300 tons rose 2.9% from the same period last year.
Aluminum inventories of 32,800 tons at the end of September were up 20.8% from September 2004 and 2.3% from August 2005. At the current shipping rate, the aluminum inventory was sufficient to cover requirements for 3.1 months, an increase of 16.5% from last year but 1.8% lower than last month.
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MEMBERSHIP
Metals Service Center Institute Adds Two New Members (top)
Two companies, an Associate member and an Affiliate, have joined MSCI.
The Associate member if Koenig & Vits, a Minitowoc, Wisconsin, aluminum producer, with Timothy Martinez as its president.
The new Affiliate member is Michelle Applebaum Research, the company formed by well-known analyst Michelle Applebaum of Highland Park, Illinois.
Welcome, both!
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BRIEFINGS
Short Items of Interest to MSCI Members (top)
Mittal Steel will spend $55 million to establish the Mittal Research Institute for Metals at Central South University in Changsha, the capital of Hunan Province in China, Xinhua, the official Chinese news service reported. Mittal also closed a deal to buy a 36.8% stake in Hunan-based Valin Steel Tube & Wire Co., Ltd.
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The Metals Service Center Institute, Rolling Meadows, Illinois, provides 'News from MSCI' as a service to its members. Please see the MSCI web site at www.msci.org for more information about the Institute, its programs and its members. Comments, suggestions, and contributions are welcome. Please submit them to news@msci.org, or fax them to 847-827-7155, Attn: Steve Weiner.
