WSD Strategic Insights CXIII: Steel is War

Thursday, 11 October 2018 23:54:56 (GMT+3)   |   San Diego
       

WSD often highlights the never ending psychological warfare between steel buyers and sellers. This circumstance is why we are witness to “buyers’ panics” when the price is soaring and pricing “death spirals” when the price is plummeting.   

Another viewpoint we’ve used time and again is that the ideal steel company management organization to successfully cope with variability and unexpected change, is the World War II submarine commander and his or her wolf pack.  If there’s a visionary leader with empowered independent subordinates, the group will succeed by:  a) navigating the enemy’s battlefield; b) identifying enemy battleships; c) firing the torpedoes successfully; and d) employing stealth to avoid the enemy’s depth charges.

Here’s a new twist.  In the hand-game called Rochambeau in which the two opponents, when the “Beau” is spoken after “Ro” and “Cham,” each put forth a hand in the form of a rock, a paper or a scissor.  The rock can’t be cut by the scissors; but, it’s covered by paper.  The fist is the rock; the spread out hand is the paper; and, extending the pointer and middle fingers is the scissor.  Employing the principles of Rochambeau may prove useful in today’s world of survivability and hand-to-hand warfare. 

Rochambeau
Item Hand Position Global Economy  Steel Industry Steel Futures
Representation
         
Rock Fist Mercantilism Global steel trade Transactions
Paper Spread out hands Globalization Protectionism Hedging
Scissor Two extended Fingers Invisible hand (price allocates resource) Price competition Illiquidity

Let’s apply Rochambeau to the global economy.  In this case, the three items are mercantilism (the fist), globalization (the spread out hand) and the scissor (two extended figures). 

Currently, President Trump (fist) is seeking to make use of mercantilism in order to “make America great again” and overcome the spread of globalization.  However, he must beware the power of the invisible hand (price allocates resource). 

What about the steel industry?  The fist is steel production, the paper is competing materials and the scissor is the never ending power of price allocates resource.

How might we use this imagery in the sprouting world of steel futures?  The fist represents transactions, the paper is hedging and the scissor is illiquidity.

Please send your ideas on this subject to pmarcus@worldsteeldynamic.com.

Hand-to-hand Warfare

 

 

 

 

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Tags: US North America 

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