Magazine article Economic Trends

The Steel Industry

Magazine article Economic Trends

The Steel Industry

Article excerpt

Although President Bush's steel products proclamation of March 5, 2002 highlighted the industry's troubles, they have long been evident in the Fourth District, where seven steel-makers have declared bankruptcy in the last 18 months.

The Bush administration's tariffs, ranging from 8% to 30%, will remain in effect for three years, but imports from NAFTA partners Canada and Mexico are excluded, as are imports from developing countries that are World Trade Organization members. The president may reconsider within the next three months and, if he deems appropriate, exclude any item listed in the proclamation. He will reevaluate the tariffs in 2003.

Within the U.S., six states derived more than $10 billion of gross state product from the primary metal and fabricated metal industries in 1999. Within the Fourth District, the areas with significant earnings from these industries are centered in Cleveland-Akron, Youngstown-Warren, Pittsburgh, and Wheeling.

In Ohio and Pennsylvania, employment in metal industries fell from 1972 through the recession of the early 1980s. Job losses moderated after 1984, and while employment continued to shrink, it did so at a much slower rate. Real earnings in metal industries followed an almost identical pattern from 1972 to 1999.

Because heavy manufacturing took hold significantly later in Kentucky than in Ohio and Pennsylvania, Kentucky's story is much different. Its metals industry includes far more mini-mills, smaller-scale manufacturing facilities that deal primarily with scrap or ready-made steel. In contrast, the integrated mills scattered across Ohio and Pennsylvania produce steel from raw materials before making it into parts used by their customers. Kentucky's employment in primary and fabricated metals was actually higher in 2001 than in 1972, and earnings have grown vigorously since the late 1980s. Compared to integrated mills' stories of bankruptcy and forced closures over the last two years, mini-mills have been relatively insulated from the industry's downturn. Most of the bankrupt steelmakers in the Fourth District specialize in production or processing.

While the actual impact of the tariffs remains to be seen, some foresee adverse effects, including a strain on steel-consuming industries (such as construction and manufacturers of appliances and automobiles) as their production costs rise along with steel prices. Such consuming industries are located throughout the District, but they coincide mostly with concentrations of heavy manufacturing.

Another adverse affect may be strained trade relations. …

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