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Steel Industry Insight

Globalization

Globalization: it’s a trend that’s celebrated and despised, welcomed and protested, anticipated and ignored.  But despite the wide range of opinions on the subject, most can agree that globalization is very much a new world order, a further step in the evolution of human civilization.  For many years, advances in communication, trade and foreign relations have allowed nations across the world to join in an unprecedented global community, and for the most part, the results have been beneficial.  However, in the wake of Japan’s devastating earthquake, tsunami and nuclear crisis, the drawbacks to globalization are becoming more apparent.

Not only has Japan’s domestic steel production nearly ground to a halt, but shortages of certain vital Japanese steel products—auto parts, for example—have affected manufacturing sectors in the US and beyond.  Fifty years ago, a natural disaster in a far-away nation would have been heartbreaking, but it would have barely affected US industries, if at all.  Now, nearly every natural or human conflict has a ripple effect on supply and demand across the globe.

This has been particularly evident in the escalating political backlash in several Middle Eastern countries.  With oil fields and ports becoming literal battlegrounds, oil prices have spiked worldwide.  Because so many countries, including the US, are finally recovering from the recent economic crisis, many companies are finding difficulty absorbing higher transportation and other oil-related costs.  Even though Libya provides only 2 percent of the world’s oil supply, the ripple effects stemming from its current conflict are profound.

It is almost ironic, then, that this issue is focused on the Latin American steel industry.  The region is still considered an emerging economic force, with ample potential to become dominant in the global market—the trend of globalization almost ensures it.    All eyes are still on Brazil as the region’s frontrunner, especially considering it is already the number one iron ore producer in the world.  But it is quite possible that in time, the country could corner the market on certain steel products (like Japan has with specialty-grade wire rod, for example), which would in turn complicate worldwide supply if a natural disaster or political conflict halted production.

Despite the drawbacks, however, globalization provides us with more opportunities to conduct and grow our businesses than if we were geographically limited.  So instead of lamenting the loss of how things used to be, we should look forward and find ways to thrive within the new system.  We all share this planet, and until we settle on Mars or develop light-speed rocket ships, we’re going to need to figure out how mesh our different economies so that any drawbacks from globalization become mere hiccups instead.


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