Up from the Ashes: The Rise of the Steel Minimill in the United States

By Donald F. Barnett; Robert W. Crandall | Go to book overview

Foreword

In the past decade the U.S. steel industry has lost nearly 20 percent of its capacity. Slow growth in demand for steel, an overvalued dollar, and an overhang of inefficient production facilities are largely to blame. Despite this rather bleak performance, however, the industry has a bright side. A group of small companies called minimills, which melt scrap in electric furnaces, have doubled their capacity in this same period and continue to grow. They have prospered because of their ability to adjust to new technologies, to use plentiful supplies of scrap, and to realize much higher labor productivity than their larger "integrated" rivals.

In this book Donald F. Barnett and Robert W. Crandall document the surprising growth of the minimills, comparing their economic performance with that of the larger steel companies. The authors find that the minimills are increasingly moving into more sophisticated product lines, taking markets away from both importers and the bigger U.S. companies. In fact, the authors show that, unlike their larger domestic rivals, U.S. minimills have costs that are as low as those of any producers in the world. Though the minimills can probably not produce all the higher grades of steel, they will be able to recapture a substantial share of the steel market from imports, thus arresting the rising trend of import penetration.

The success of the minimills, which now number more than forty firms, may provide an example for other industries and for government policymakers. Rather than attempt to protect and rejuvenate large producers, it may be more productive to encourage new, entrepreneurial firms to grow. The minimills provide at least one example of a domestic enterprise that has risen virtually from the ashes of a seriously troubled industry.

Donald F. Barnett, formerly chief economist and vice president of the American Iron and Steel Institute, is an independent consultant and a member of the faculty of the University of Windsor. Robert W. Crandall is a senior fellow in the Brookings Economic Studies program. The authors are particularly grateful to Alice M. Rivlin for her helpful

-vii-

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Up from the Ashes: The Rise of the Steel Minimill in the United States
Table of contents

Table of contents

  • Title Page iii
  • Board of Trustees v
  • Foreword vii
  • Contents ix
  • I- Two Distinct Industries 1
  • Summary 16
  • II- The Competitive Position of Minimills 18
  • Summary 35
  • III- The Decline of the Integrated Sector 36
  • Summary 55
  • IV- Changing Technology and the Minimills 56
  • Summary 70
  • V- Future Scrap and Electricity Supplies 71
  • Summary 94
  • VI- Industrial Policy- The Lessons from Steel 96
  • Appendix A- Tables 115
  • Appendix B- A Simulation Exercise- Scrap Availability for Electric Furnaces 126
  • Appendix C- A Model of the U.S. Iron and Steel Scrap Market 129
  • Index 133
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