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

VI
Industrial Policy: The Lessons from Steel

The recent problems of the U.S. steel industry have been felt most intensively in the integrated sector, where capacity for making steel has been reduced sharply. The cuts are even deeper than they appear to be, for many plants will never resume capacity operation. The problems of the integrated sector have, of course, been exacerbated by the growth and competitiveness of the minimills, which are still adding capacity and expanding their product range. However, the minimills too have problems. They have tended to overcrowd in the product markets they find most comfortable: reinforcing bars and light shapes. The minimills have found it easy to enter the low-product-quality range, and now they must realize the corollary--it is also easy (but not painless) to exit. A shakeout in the minimill sector is under way and is likely to continue, unless some companies move to other products.


The Economic Climate for Minimills

In the coming years, growth in the steel market will be slow, both worldwide and in the United States. This will be true in the product specialties of both minimills and integrated firms. Thus, minimills will grow largely at the expense of integrated producers.

Projections of steel consumption are based on an analysis of the rate of growth of the demand for steel relative to gross national product (in 1972 dollars). The ratio of steel consumption to GNP has been falling continually in the United States since the 1950s.1. In 1955-59 the United States consumed 108.5 tons of steel per million dollars of real GNP. By 1970-74, consumption had declined to 92.9 tons, even though there had

____________________
1.
American Iron and Steel Institute, Annual Statistical Report, 1984 ( Washington, D.C.: AISI, 1985), table 1A and earlier issues; Economic Report of the President, February 1985, p. 234.

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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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