What is the cause for the current spike in steel prices, and why is the spike so sharp?
Chris Plummer, managing director, Metal Strategies: The most important factor is China. Around early 2002 the Chinese government instituted a policy of very strong growth, mandating public works projects and freeing up some of the banking regulations to help promote and finance new construction and industrial projects. Basically, they put their economy on full throttle, and that has had an overwhelming effect on any commodity that you can think of, from steel to aluminum to raw material to consumer goods. It has even had an effect on things like ocean shipping rates. At the same time the Russians, Ukrainians, and some of the other major exporters of scrap—and by the way, the U.S. has always been the world’s largest scrap exporter—over the last 12 months have instituted significant tariffs or outright bans on exports of scrap, as well as limitations on alternative irons, such as pig iron and direct-reduced iron. And there hasn’t been much in the way of new, alternative iron capacity bui
