Editor,SteelOrbis China

A stimulus package estimated at RMB 4 trillion ($570 billion) initiated by Premier Wen Jiabao in 2008 has become an object of public denunciation as it has been a trigger to stimulate a rapid inflation, despite some economists mentioned this package successfully help China avoid a global recession. Through spending such a big package in 10 major areas, including low-income housing, rural infrastructure, water, electricity, transportation, the environment, technological innovation and rebuilding from several disasters, most notably the May 12 earthquake happened in Wenchuan, Sichuan province, China really enjoyed a “golden age” when developed countries suffered from economic crisis. However, some economists said China has missed the best time to run structural adjustment, what’s worse, overcapacity in some industries, like metallurgical industry and steel industry witnessed a huge increase from 2008 to 2012, which was thought as an essential reason of current painful sluggishness in demand.

At 11th International Steel Market and Trade Conference held on Mar 28-30 in Guangzhou, China, during her speech on China’s macro economy and real estate industry, RenXingzhou, the director of Institute of Market Economy, Development Research Center of the State Council, underlined for the first time in 18 years, Chinese central government is seeking improvement in stability instead of setting a target for rapid development. While, it seems that local governments could hardly keep in line with central government at this point. Over the past 3 months of 2013, several provinces have issued their plans of fixed asset investment, for instance, Sichuan (RMB 4.3 trillion), Guizhou (RMB 1.7 trillion), Zhejiang (RMB 10 trillion), Guangxi (RMB 1.5 trillion), Jiangxi (RMB 669.4 billion), Guangdong (RMB 786.9 billion) and Yunnan (RMB 377.055 billion), indicating a sum of around RMB 20 trillion ($3.2 trillion). This amount has been much more than the stimulus package of RMB 4 trillion ($570 billion) in 2008.

In the National People’s Congress and the Chinese Political Consultative Conference (NPC&CPPCC), Dong Dasheng, Deputy Auditor-General of National Auditing Administration estimated that the total volume of local debts in China might be RMB 15-18 trillion ($2.4-2.9 trillion). The huge amount of local debts has exerted a negative impact on China’s sovereign rating, for instance, Fitch has downgraded China’s rating from AA to A+ on Apr 9, while Moody lowered China’s rating from positive to stable on Apr 16. As the first year of a new group of leaders in China, 2013 is regarded as a big chance to show new leaders’ abilities around the country, which stimulates high growth in FAI. However, some economists suggest that China must stop the high-risky mode of “expansive investment-expansive debt”, to implement a soft landing of economic development, or overcapacity will become worse and worse.

The overcapacity of China’s steel industry has become an accepted fact, with its rate of capacity utilization in 2012 at only 72%, while whose crude steel output in 2012 accounted for 46.3% of global steel output. At the same time, the rate of capacity utilization in cement industry was around 75% in 2012. Some previous emerging industries, like photovoltaic industry and wind power industry also faced the problem of overcapacity, with Suntech-power, the leader in China’s photovoltaic industry going bankrupt on Mar 18 due to overlapping investment among the country.

More and more people in China realized high growth in GDP might not equal to more happiness, as high speed of FAI, GDP will inevitably push up consumption prices and labor costs. While higher inflation always indicates the living standard goes down.

Vice President, Environment & Energy
Steel Manufacturers Association

Recycled ferrous scrap typically constitutes over 90 percent of the material input of electric arc furnace (EAF) steel producers, aka “minimills.” The recycling of steel scrap in EAFs plays an important role in the conservation of energy. On a per-ton basis, steel produced from melted scrap requires roughly one-third of the energy consumed in the production of steel from iron ore. The recycling of steel scrap also reduces the burden of disposal in landfill facilities and prevents the accumulation of otherwise abandoned steel products.

US minimills are America’s largest recyclers. Steel is recycled five times more than the sum of all other metals combined, including aluminum, copper, lead, nickel, chromium and zinc. The high rate of recyclability of steel in EAFs is one of North America’s best environmental success stories.

Steel is recycled five times more than the sum of all other metals combined, including aluminum, copper, lead, nickel, chromium and zinc.

Minimills are the major growth component of the North American steel industry. While much of the industry has shrunk over the past three decades, the minimill share of US steel production has continued to grow, from 10 percent in the 1960s, to roughly two-thirds of US production today.

US minimills achieve continuous technological improvement and are committed to work practices and an entrepreneurial spirit to deliver high quality steel quickly and at competitive prices. In minimills, decision making is pushed down to the shop floor, and production employees have the authority to make decisions and obtain the resources necessary to continuously improve operational procedures and efficiency. US minimills are characterized by lean, streamlined organizations. Average productivity in the US steel industry is slightly in excess of two man-hours per ton of steel produced. Several minimills, however, produce steel at less than one man-hour per ton, and some below 0.4 man-hours per ton. Productivity is an integral component of their competitiveness.

EAF steel producers have also pioneered the usage of various forms of iron to upgrade the quality of steel products, positioning them for expansion into critical finished market applications. These steel producers are poised to take advantage of the development of North America’s extensive energy resources. Minimills are rapidly moving up the steel mill product value chain, with product lines that have expanded to include heavy and light structurals, rail, plate, pipe and tube, sophisticated special-bar-quality products, as well as hot-rolled and cold-rolled sheet, wire rod, galvanized, and stainless sheet steel, used by the most demanding customers, including the automotive industry.

Although EAF steel production is energy-intensive, it is also a highly energy-efficient process in comparison to other forms of steel production. EAF steel production requires the consumption of approximately 4.5 to 5.5 million BTUs per ton. This is 92 percent less energy than is required to produce a similar ton of aluminum, and 75 percent less than the energy needed for a ton of ore-based steel production. The highly efficient energy consumption of EAF steel producers conserves energy in the production of new steel, and supports the nation’s energy goals.

The United States is one of the most competitive places in the world to manufacture steel. The US enjoys marked advantages in practically every aspect of steelmaking, including: access to capital, technology, and raw materials; relatively low energy costs; high labor productivity; and proximity to the US market. The competitive position of EAF steel producers is largely dependent upon an adequate domestic supply of ferrous scrap. The US owns the world’s largest ferrous scrap reservoir, due to the size and advanced nature of the nation’s economy, in addition to well-established domestic recycling networks.The US owns the world’s largest ferrous scrap reservoir, due to the size and advanced nature of the nation’s economy, in addition to well-established domestic recycling networks.

The US owns the world’s largest ferrous scrap reservoir, due to the size and advanced nature of the nation’s economy, in addition to well-established domestic recycling networks.

As global steelmaking capacity continues to expand, along with increased EAF utilization, a rising number of nations have imposed an array of mechanisms to benefit their domestic steel producers by intervening in raw material markets and restricting the flow of their own ferrous scrap supplies. Export restrictions on steel scrap have a number of negative consequences. First, these restrictions limit the amount of scrap that is available to be traded globally. The measures also increase exports from countries, such as the US, that do not have export restrictions on scrap. This makes scrap in the US more expensive, and discourages US steel production.

Export restrictions also have longer-term pernicious effects, such as driving down the price of scrap in host countries, and discouraging the expansion of recycling networks and investments in energy and material efficiency. This in turn further reduces the supply of tradable scrap, and increases scrap prices in the rest of the world.

Export restrictions have longer-term pernicious effects, such as driving down the price of scrap in host countries.

Over the past decade, annual US ferrous scrap exports have nearly tripled. The US exports more ferrous scrap than any country in the world, roughly one-third of its annual production. Despite a short-term employment boost from increased scrap processing and export, this rate of scrap exports raises economic concerns, including both the near-term impact on North American steel industry competitiveness, and the future sustainability of the domestic scrap reservoir.

If the US supply of ferrous scrap is mined out to an unacceptable level by excessive foreign demand from countries that impose policies to conserve their own scrap supplies, there are clear national economic security implications to consider. An inflationary scrap market price triggered by excessive foreign demand would negatively impact the competitive position of US EAF steel producers, and therefore the capability of the US to produce an adequate domestic supply of steel.

National economic security is a core reason for the US to have a viable, strong domestic steel industry. US EAF steel producers are an essential component of that security. That is precisely why US policy should clearly recognize the value of, and need to ensure the continued viability of, the US supply of ferrous scrap.

The United States cannot rely on offshore steel supplies to rebuild the nation’s energy sources, infrastructure, transportation network, roads, schools, water-works, bridges, airports and hospitals. The competitive capability of US EAF steel producers is unique worldwide, and is dependent upon an adequate supply of domestic ferrous scrap.

In recent years, global steelmaking capacity has grown at an unprecedented rate. The world’s steel consumption, however, has not kept pace, contributing to a large and increasing gap between global steelmaking capacity and demand. Excess global capacity is now estimated to be over 500 million metric tons, and is legitimate cause for concern.

Excess global capacity is now estimated to be over 500 million metric tons, and is legitimate cause for concern.
Global Steelmaking Capacity and Consumption
(in million metric tons)

The vast majority of capacity growth has occurred in non-OECD nations. Too often government policies and not market forces influence the building and maintenance of steelmaking capacity. Some of the same factors that impact a government’s decision to promote capacity growth—notably employment and economic development—can impair the ability to effectively respond to market conditions. This is troubling, particularly in a time of waning global economic growth. Even a relatively small amount of unfairly traded excess production has the ability to severely damage international markets.

Some foreign governments have implemented policies that include support for the development of export-oriented steelmaking capacity. In the absence of sufficient domestic demand, these nations rely upon export markets to consume their excess production, often illegally trading subsidized products.

The steel industry of the US and its foreign counterparts are highly capital-intensive. Mills that melt their own steel to produce finished steel mill products need to be high volume, continuous operations. Low operating rates are insufficient to cover high fixed costs and normal variable costs. That is why steel industries in the developed countries are pressing China and other nations to reduce government-financed excess steelmaking capacity to bring the world industry into better balance, and to strengthen the industry worldwide. Otherwise, such major excess capacity finds its way into “beggar thy neighbor” steel trade, damaging markets around the world.

Despite its comparative advantage in steelmaking, the US remains a significant net importer of steel. While US steelmaking utilization rates have not yet returned to pre-recession levels, import levels have steadily increased. With rising excess capacity and weak markets throughout much of the world, North America has become the market of last resort for a number of nations. A rising level of steel imports continues to undermine the weak US economic recovery.

While US steelmaking utilization rates have not yet returned to pre-recession levels, import levels have steadily increased.

Steel industry job growth lies in the increased melting and pouring of finished steel products. Based on competitiveness, US producers should be making more of the steel that is consumed both domestically and in markets overseas.

If the US were to expand steel production to take advantage of its supplies of scrap and comparative advantage in steelmaking, the domestic economy would realize all of the economic benefits of consuming the valuable raw material known as scrap.

Based on a recent American Scrap Coalition study, expanding US steel production to match domestic consumption would create approximately 100,000 new jobs, directly and indirectly, and would increase GDP by more than $30 billion. This would contribute significantly to raising employment in the US while reducing the US trade deficit. The US can no longer allow trading partners to directly violate the rules of international trade at the expense of the domestic economy.

The Steel Manufacturers Association (SMA) consists of 35 member companies that account for over 75 percent of North American steelmaking capacity. SMA members operate 127 steel plants across the continent, directly employ over 60,000 people, and indirectly generate an additional 300,000 jobs in supporting industries.

Up until then, the most commonly utilized iron ore carriers, Capesize ships, capped out at an approximate capacity of 180,000 tons. Contracting them was not cheap; the average transport time from Brazil to China is about 45 days and the cost to get shipments from point A to point B came at a cost of just over $100,000 per day. Then came 2007: the year Vale’s ship chartering costs increased by nearly 80 percent. It was time for a change, and the Valemax ships were conceptualized to be a world-wide game changer.

Valemax ships were conceptualized to be a world-wide game changer.

Vale’s plan involved the construction of 35 ships that would have the capacity to carry up to 400,000 tons of iron ore per trip, well surpassing the previous record holder, the Berge Stahl, which was rated at 364,000 tons.  From a mental imaging perspective, these ships would be nearly four times the length of a football field. They would be big, lean, iron ore transporting machines.

One Valemax shipment, they said, would be able to carry more than twice the capacity of a single Capesize vessel. Vale officials believed that by constructing and implementing the Valemax fleet into service, they would cut transport costs by 20 percent. China raised an eyebrow at first, but seemed to come on board not long after the announcement. This may have been due to a 12-ship, $1.6 billion contract having been awarded to Chinese shipbuilder Jiangsu Rogsheng Heavy Industrises (JRHI)—the single largest shipbuilding contract of its kind.

An additional 16 vessels would be built in South Korea and China for other shipping companies but would be contracted to Vale for long-term use. The final seven were ordered from South Korea’s Daewoo Shipbuilding and Marine Engineering.

The first vessel was delivered to Vale in November 2011. JRHI affirmed the balance of what they were working on would be delivered by the close of 2012. In December 2011, the Berge Everest mega-ship docked in the port of Dalian and unloaded approximately 350,000 tons of iron ore in less than 55 hours—a feat which made international headlines. Chinese steel industry executives were thrilled, with one industry association leader citing a belief that this would help lower production costs.

But while world economists were busy chattering about how the Valemax ships were making history, Chinese shipping companies were more focused on their bottom lines. On January 31, 2012, the Chinese Ministry of Transport (MOT) announced that ships exceeding the approved capacity of 300,000 tons would no longer be permitted to dock in China’s ports. The mandate was immediate.

While world economists were busy chattering about how the Valemax ships were making history, Chinese shipping companies were more focused on their bottom lines.

Vale officials balked, and global exporters of coal and oil followed suit. It wasn’t until two days later, when the MOT released a clarification that only dry bulk ships carrying more than 350,000 tons would be banned, that sighs of relief began to emerge. Vale, though, was still firmly situated between a rock and a hard place—it was hardly a coincidence that the only vessels of that size were being used to transport their iron ore.

The official stance offered by the MOT was “safety concerns,” although many believed it was just an excuse to squeeze Vale out of the shipping business. Even though the rumors have not been confirmed or denied, the general consensus is that the decision to ban Valemax ships from docking in China came after the Chinese Shipowners Association and state-owned China Ocean Shipping Group Company (COSCO) threw a big, raging tantrum. Of course, COSCO spokesperson Guo Huawei denied his company made any attempts to influence the MOT.

Vale immediately began making other arrangements, including re-routing Valemax ships to the Philippines. Industry insiders have said they are negotiating other projects in Japan and South Korea, and are on track to open a hub in Malaysia next year.

Brazilian iron ore hasn’t been banned from entering the country, they noted, which is why Vale moved to secure ground transport into China via other means. Ship-to-ship transfers, in which transfer vessels with cranes grab and discharge iron ore into smaller ships, have also been utilized.

Everything seemed to be running as smoothly as could be expected, although more animosity reared its head in the months to come. In April 2012, Chinese shipbuilder JRHI reported that Vale had refused to take delivery of the final two Valemax vessels. One month later, COSCO executives were dumbfounded when they learned that Vale moved to stop using the company’s ships to transport their product.

Vale has refuted accusations that they have taken retaliatory measures, pointing out that executives traveled to Beijing shortly thereafter in hopes of clearing the air. COSCO secretary general Zhang Shougo confirmed the company’s willingness to partner with Chinese shippers to discuss transport.

Still, the MOT’s decision caused the Brazilian miner to take a substantial financial hit. At the close of 2012, Vale reported a $2 to $3 per ton loss from shipping costs related to alternative methods needed to transport iron ore from Valemax ships into China.

At the close of 2012, Vale reported a $2 to $3 per ton loss from shipping costs related to alternative methods needed to transport iron ore from Valemax ships into China.

Pressure from the steel industry

Steel mills in countries throughout Southeast Asia began to face higher raw materials costs toward the end of 2011. And once the price of iron ore begins to climb, prices for finished steel products soon follow. Countries such as Korea, Taiwan and Vietnam have attempted to pass on those increases to American buyers, but the US domestic market has not been robust enough for those increases to be absorbed.

Chinese steel companies  also seemed to feel the pinch. On January 31, 2013, the Chinese Steel Association sent out a notice indicating their full support of Valemax ships being allowed to dock in Chinese ports. A decrease in iron ore costs could have a positive impact on profit margins, they said, and allowing Vale to directly unload from their megaships makes financial sense. In the end, bringing down the cost of iron ore would allow Chinese mills to reap the benefits of higher profit margins.

Additionally, Vale’s Executive Officer for Ferrous Minerals and Marketing, Jose Carlos Martins, was quoted in a Brazilian newswire saying Valemax ships will be able to return to China later this year. The MOT, though, is remaining tight-lipped and has yet to indicate whether they are considering a reversal of the ban.

When and if a reversal will be announced has yet to be determined, and whether political pressure from neighboring countries has played any part in a recantation is not yet known. Resistance to a shift in the status quo is often immediate, and the idea that the Valemax ships have a lifespan of 25-35 years may be a hard pill for China to swallow. But like it or not, the vessels are here to stay. The question is whether Chinese shippers will adapt and change, whether they will fight tooth and nail to keep things the same.

And if so, whether they will be left behind as the rest of the world flows toward advancement.

The man: 

John Correnti has decades of experience in the steel industry working for various corporations, but many know him best as the ousted executive of Nucor Corp. From 1991 to 1999, Correnti served as the President of Nucor, and was the steelmaking giant’s CEO from 1996-1999. He joined Nucor in 1980 and became Nucor’s Vice President in 1984 and served as the company’s COO from 1991-1996. A press release from Nucor at the time of Correnti’s departure simply stated: John D. Correnti has resigned as vice chairman, president, chief executive officer and director. However, industry rumblings indicated that Correnti did not resign so much as he was “let go,” and the decision followed a vicious boardroom battle. Forbes later said Correnti believed his departure from Nucor was “an ego-driven power play.”

But Correnti did not simply pack up his bags and go into early retirement—by the end of 1999, he was serving as the CEO and Chairman of Birmingham Steel Corporation, a position he held until December 2002. Then, from 2002-2005, Correnti was the Chairman and CEO of SteelCorr, LLC, and also served as the company’s president. In 2005, Correnti founded SeverCorr, LLC—later to become Severstal Columbus—and served as the company’s president until January 2008, at which point industry sources say he was bought out by Severstal NA.

Since then, Correnti’s name has been attached to a number of projects, both related and unrelated to steel. In 2008, Correnti, serving as president of Steel Development Co. LLC (SDCO), set out to build a group of four rebar minimills and one flat rolled minimill in Amory, Mississippi. The project received the necessary environmental approval from the state and was already underway when Chinese steelmaker Anshan Steel announced in May 2010 that it signed a “stake investment” with SDCO to hold an approximately 15 percent stake in the company. However, just a few months following the announcement, Anshan put its investment plans on hold following strong opposition from US Congressional leaders.

A group of about 50 Congressman insisted on an investigation of the Chinese steelmaker’s potential investment—not a major surprise given the myriad of US antidumping and countervailing duty cases against Chinese steel products at the time. Vice-Chairman of the Congressional Steel Caucus, Republican Tim Murphy, said in a statement: “Not only would this venture have set a dangerous precedent further undermining our domestic steel market, but it posed a serious national security concerns. We will continue to fight to protect our domestic steel manufacturers should China attempt to infiltrate American steel companies in the future.”

Correnti deemed the investigation absurd considering Anshan would only own less than one-fifth of the total project. Still, the project was never completed.

More recently, another Correnti-headed project, a two-phase silicon metal production plant and a silicon purification plant, was stalled after the production plant failed to place the proper funds in escrow by December 31, 2012 to hold the property. The Mississippi Legislature had previously approved $75.5 million in incentives for Calisolar (later rebranded as Silicor Materials) during a September 1, 2011 special session.
The mill:

In January of this year, Correnti went back to his roots for a new steel mill venture. The company, Big River Steel, LCC, announced that it would build a more than $1 billion steel mill in Mississippi County, Arkansas that would employ over 500 people with an annual average compensation of $75,000 a year—a boon to the region. John Correnti is not only Big River Steel’s CEO, but he also heads a group of investors backing the project.

The Arkansas Economic Development Commission (AEDC) said that the plans are contingent on approval by the legislature authorizing the state to issue $125 million in general obligation bonds under the authority of Amendment 82 and all necessary regulatory approvals. Of the $125 million generated by the sale of the bonds, $50 million will be a loan to Big River Steel; $50 million will be used for site preparation; $20 million for costs associated with piling—subsurface stabilization and $5 million bond issuance cost.

As required by the Amendment, Arkansas Governor Mike Beebe would refer the project to the legislature for its consideration. This project would mark the first time Amendment 82 has been triggered since its adoption during the November 2004 general election.  The amendment would allow the state legislature to approve up to 5 percent of the state’s general revenue budget to be used for bonding of super economic development projects.

Given the magnitude of the state’s funding participation, the AEDC has taken some safeguards: $300 million in equity from company investors and commitments from other lenders must be deposited into an escrow account before bonds are sold; $250 million of company money must be spent before any bond proceeds can be spent on the project. The largest of those investors is slated to be multi-billion dollar private investment company Koch Industries, which confirmed its participation in early February, although exact monetary amounts and other investors were not immediately disclosed.

Correnti later told Prime that the mill would contain an electric arc furnace that would produce flat rolled coils up to 78 inches wide and one-inch thick, in addition to high-strength low-alloy steel for the automotive market and electrical steel for power transformers/electrical motors. He noted that this new mill would focus on niche products/markets that are now often filled by imports and Big River would not be in competition with other domestic EAF producers, but rather foreign producers that export steel to the US, in addition to some local high-cost integrated producers. Correnti said that in the mill’s first phase, it will have the capacity to produce 1.7 million tons, and phase a possible phase two would bring annual steelmaking capacity up to 3 million tons.

Correnti explained choosing a location situated on the Mississippi River was carefully determined—55 different sites were evaluated before the final decision was made. A nearby railroad, availability of steelmaking raw materials (scrap) and utility rates, in addition to “where the market for our products is” all influenced the final choice to build a mill in Mississippi County.

Approval of Amendment 82 is crucial to the mill’s future in Arkansas—without it, Big River Steel won’t get built in the state. “If it doesn’t get built here, it will get built elsewhere,” Correnti said, although he wouldn’t speculate about where exactly “Plan B” would be located; nevertheless, he was confident that “things will work out in Arkansas.”

Should everything move smoothly in the Arkansas legislature, financing could close as early as this August, with construction beginning soon after. Correnti anticipated that construction would begin by the end of 2013 and construction would take approximately 20 months.

The concerns:

Any multimillion dollar venture will inevitably have its supporters and its skeptics. The AEDC is likely the largest supporter of the project, other than Correnti himself, as statements from various state officials touted the significant economic impact the new jobs would bring to Arkansas in general and Mississippi County in particular. Overall, the response to the mill coming to the state has been positive, according to AEDC officials.

Apprehension about Big River seems to be largely split between two different concerns: whether the necessary funds will come through and the mill will be completed and whether there is room in the US market for yet another flat rolled (or rather, any) new steel mill. Various industry sources agreed that the former is certainly valid given the unpleasant way some of Correnti’s previous ventures ended, but the involvement of the multibillion dollar Koch Industries, in addition the AEDC’s safeguards, is promising.

But whether the US steel industry can absorb another 1.7 million tons of flat rolled steelmaking capacity is another issue. Even though the US has climbed out of the depths of the recession in the last few years, 2012 was a difficult year for the steel industry, and the flat rolled market in particular. Last year saw the inevitable bankruptcy, closure and then sale of RG Steel, just months after the Sparrows Point, Warren and Wheeling mills were acquired from Severstal and restarted. Additionally, ThyssenKrupp AG indicated its interest in selling its slab mill in Brazil and flat rolled rolling mill in Calvert, Alabama, prompting many to concede that the current demand environment cannot support more steel.

Correnti dismissed concerns of overcapacity, particularly for the niche products that Big River Steel would produce, and was adamant that there is “always room in the market for a low-cost, quality producer,” and maintained Big River’s focus to displace imports rather than vie for dominance in the crowded domestic steel industry.

If previous projects are any indication, it may be quite some time before we hear of a groundbreaking ceremony for the Big River Steel mill, and even longer to determine the mill’s staying power. One thing does appear certain, though: John Correnti and his multimillion dollar venture plans are here to stay.

You can watch the first session here:

And yet the rise of our mechanical counterparts should be embraced.

Already, the industrial sector has seen machinery replace a significant portion of manual labor in the last century; but no matter how advanced a machine becomes, it still needs a human to operate it and troubleshoot problems that inevitably arise.  These are precisely the “machine overseer” type jobs that many companies are sending to China, India, Mexico and other places where the cost of labor is ridiculously low.  Of course, companies who outsource also enjoy lower tax rates, lower start-up costs, and other perks of being a first-world business in a developing economy.  But labor costs are the main incentive to move.

So what if there was some way to lower the labor overhead of major manufacturing firms while keeping the taxes, profits, and upper-management jobs in the US?  What if the “machine overseer” could be a machine as well?  As evidenced by developments in robotics, that is an increasingly real possibility.

Many visitors to Disneyland have seen the ASIMO exhibit at Tomorrowland, featuring a soft-spoken, highly flexible robot that can do seemingly everything an under-the-table household helper of questionable legality can.  But running million-dollar equipment in a manufacturing facility or fabrication shop or other steel-related business requires a level of intelligence and intuition that has, until now, been a uniquely human quality.

Enter Boston-based Rethink Robotics, which has recently introduced Baxter—a breakthrough in real-world robotic applications due  not only to Baxter’s capabilities, but its widely attainable purchase price.  According to the company’s website, Baxter performs various repetitive production tasks while “safely and intelligently working next to people” by exhibiting “behavior-based common sense.”

Although many people who have thrown a cell phone or two against a wall or furiously pounded on an unresponsive computer keyboard might scoff at the mere idea of a machine with common sense, Baxter features “human presence detection” (so it won’t bump into you while you’re enjoying your morning coffee) and “visual object identification” (so it won’t scan sensitive instruments with a glazed donut twist).  As a bonus, Baxter even has an LCD screen face atop his bulky mechanical body with crudely-drawn eyeballs to give it a hint of humanity among its less-intuitive machinery peers, all of which offer a “compelling alternative to low-cost offshoring for manufacturers of all size.”

In fact, the future prevalence of Baxter-type labor could not only prevent US companies from outsourcing manufacturing or moving companies wholesale overseas, but the promise of lower-than-sweat-shop labor costs could even bring firms that already have overseas operations, like Caterpillar and Apple and Nike, back to the US for good.  The surge of renewed tax revenue would not only halt or eliminate all fears of the “fiscal cliff,” it would build a shining bridge of hope over the cliff and onto the promised land of prosperity beyond.

Anyone familiar with “The Jetsons” or “Star Trek” knows that eventually, machines will replace most lower-level employment functions, so there’s no point trying to reserve those jobs for humans who can’t compete with Baxter’s one-time investment of roughly $20,000 that will cover years of service (plus, robots don’t take sick days or vacations or complain about working conditions—so hey, no unions!).

Then again, anyone familiar with “Terminator” or “Battlestar Galactica” knows the inherent risks of giving robots too much responsibility and power. As long as we don’t plug them into the internet, where they could become self-aware and gain access to military applications, we should be able to enjoy a veritable “Robotopia” in which US companies stay in the US and we can still buy stuff dirt cheap at Wal-Mart.