The Japanese are running out of steel. That’s big, since the Japanese steel industry provides most of the building material for the booming Chinese economy, as well as the booming Japanese auto industry and Korean shipbuilding industry.
News today is that two of the big mills in Japan, Nippon Steel and JFE, which are both cranking 24/7, are unable to meet demand from Nissan. The automaker will delay production of at least 25,000 cars, and may cut another 15,000 in March. That’s a $58 million cut in profits, simply because they don’t have the material to make their product.
Add to that the news that JFE is shutting down one of its blast furnaces in early ’05 to overhaul the process and boost its capacity, and we’re looking at a real squeeze on everything from plate to pipe for the first half of next year. The price of welded steel pipe has already doubled since January.
Sooner or later, we’re going to see that increase reflected in the prices of washing machines, air conditioners, and new cars. Let’s see how Alan Greenspan counters that. The Fed’s gun is nearly out of bullets.