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

show no significant productivity growth and the other two evidence annual productivity growth of 2.0 and 3.9 percent. Wire rods exhibit large negative residuals after 1975 (when Raritan River and Georgetown's Texas plant began production). And reinforcing bars also show a large price break after 1975. Minimills appear to have driven prices down through competitive pressures arising in part from their greater productivity growth. A similar pattern is likely to emerge in the other products when the minimill assault is extended to them. The four integrated products, by contrast, show very little break in prices after 1975.


Summary

The development of new, lower-cost production technologies for electric furnaces and continuous billet casters has stimulated the startling recent growth in the minimill sector of the U.S. steel industry. The new plants' costs are decidedly lower than those of their integrated rivals.

International competition has proved devastating to the integrated companies, whose costs were rising relative to their more efficient foreign rivals' through 1985. The production costs of U.S. minimills have been very close to those in foreign minimills, and they have been declining in recent years. The minimills have been able to generate much larger productivity gains than the integrated firms and they have enjoyed much lower raw materials costs. They have been able to reduce prices and meet foreign competition--albeit at compressed profit margins in the 1980s--while the integrated firms often have not. As the U.S. dollar has fallen in 1986, the minimills have become virtually invulnerable to foreign competition, and the integrated producers have become more cost competitive.

-35-

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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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