US Steel Industry Research Articles

Safeguards, China, and the Price of Steel

The economic health of the US steel industry has fluctuated enormously over the last ten years. The implementation of steel safeguard tariffs in 2002 brought intense scrutiny by academics and industry observers, but little empirical work has focused on the factors that led to the industry’s dramatic reversal of fortune in the period that followed. We use a panel data set of product-level monthly price observations between 1997 and March 2005 to test the importance of the safeguards compared to other possible determinants. We find little evidence that the safeguards affected steel prices in the United States. Instead, results indicate that declining production capacity, improved macroeconomic conditions, and a falling dollar helped return prices to healthier levels. Finally, China’s demand for imported steel, which has not been included in previous empirical studies on the US steel industry, also appears to impact prices, but only after a lag of more than six months.

Local Labor Market Conditions and Retirement Behavior

In this paper, we explore the effect of local labor market conditions on the labor supply decisions of older workers. We use three different sources of variation: shocks to the US steel industry, shocks to Appalachian coal mining, and shocks to US manufacturing. While each experiment uses different methodology, the three tell a remarkably consistent story: the retirement decisions of Americans over the last thirty-five years have been affected by the performance of local labor markets. First, using variation induced by the decline in the US steel industry, we find that a 10 percent reduction in earnings resulting from the decline of the primary metals industry resulted in a 1.5 percent increase in the participation and expenditures of the Old Age program. Second, using variation in coal prices induced by oil shocks, we find that a 10 percent increase in earnings from the coal industry reduced participation about 0.9 percent and decreases expenditures about 1.2 percent. Finally, looking at variation induced by the concentration of manufacturing employment, we use micro data to examine the age and education levels of those who retired.

The US Economy from 1992 to 1998: Historical and Decomposition Simulations with the USAGE Model

USAGE is a 500 industry dynamic computable general equilibrium model of the US economy being developed at Monash University in collaboration with the US International Trade Commission. In common with the MONASH model of Australia, USAGE is designed for four modes of analysis: Historical, where we estimate changes in technology and consumer preferences; Decomposition, where we explain periods of economic history in terms of driving factors such as changes in technology and consumer preferences; Forecast, where we derive basecase forecasts for industries, occupations and regions that are consistent with trends from historical simulations and with available expert opinions; and Policy, where we derive deviations from basecase forecast paths caused by assumed policies. This paper reports our first set of historical and decomposition results. The historical results quantify several aspects of technical change in US industries for the period 1992 to 1998 including: intermediate-input-saving technical change; primary-factor-saving technical change; labor-capital bias in technical change; and import domestic bias in technical change. The historical results also quantify shifts in consumer preferences between commodities. The decomposition results are applied in illustrative analyses of growth in US international trade between 1992 and 1998 and of growth in the US steel industry for this period.

Specialization and its discontents: the pernicious impact of regulations against specialization and physician ownership on the US healthcare system.

Ken Iverson, a technology entrepreneur, almost single-handedly revived the moribund US steel industry. His success contains important lessons for health care. Nucor, the steel-focused factory Iverson managed, differed from the everything-for-everybody steel behemoths of yore, like Bethlehem Steel, with its specialty steel products and relatively small mini-mills, as did his egalitarian, productivity-based management practices. Nucor paid its nonunionized workers like owners, primarily with productivity-based incentives. In contrast, Bethlehem Steel’s unionized workforce was paid wages, largely regardless of their productivity. The results of this revolution in focus and incentives? Nucor required 1 man-hour per ton of steel and Bethlehem 2.7; Nucor’s workers earned $60 000 ($40 000 from bonuses), and Bethlehem’s $50 000; and Nucor was highly profitable, earning $100 million in recessionary 2002, whereas Bethlehem lost $2 billion.1 Nucor did good for its customers, employees, and the US economy, and it did well for its shareholders, including Ken Iverson, currently hailed as the second Andrew Carnegie of the industry. Sadly, were Iverson a cardiologist or cardiac surgeon, he could not create the “do good–do well” healthcare-focused factory equivalent of Nucor.2 Rival everything-for-everybody hospitals would allege that he was robbing them of their most profitable business, leaving them with the money-losing dregs, while federal government regulations would inhibit doctors’ ownership stakes.3 The combination of negative press and legislative prohibitions creates daunting obstacles for productivity-minded entrepreneurial physicians. For example, MedCath, a partially physician-owned heart hospital firm, spends up to $200 000 to counter hospital complaints per project per year.4 Not surprisingly, relatively few focused healthcare facilities exist. A 2003 study found only 92 specialized hospitals, fewer than 2% of the market, and, more importantly, other physician-owned facilities that integrate care are sparse.5 These results are unfortunate: Specialized healthcare facilities, partially owned by entrepreneurial physicians, represent the best …

Move over! Stock turnover, retrofit and industrial energy efficiency

We demonstrate the importance of stock turnover on industrial energy efficiency through a literature review and a case study of energy-intensive equipment, i.e. the electric arc furnace in the US steel industry. We describe the common methods for assessing stock turnover. We have found that both stock turnover and retrofit are important elements to explain the energy efficiency improvement rates. We investigated the development of electricity use in electric arc furnaces in the United States by tracking the development of individual furnaces over the period 1990–2002. This provides a detailed picture of changes in the stock or fleet of furnaces through turnover and/or retrofit. Our results confirm the results of other empirical studies that there is no clear lifetime of equipment. However, retired furnaces are distinctly less efficient than furnaces remaining in the stock, while new furnaces are distinctly more efficient than the average stock. We found an annual average improvement in specific electricity consumption of 1.3%/year over the studied period, of which 0.7%/year was due to stock turnover and 0.5%/year due to retrofit of stock in service throughout the period.

Dynamics of Market Power and Concentration Profiles

This paper examines some of the economic and econometric issues that arise in attempting to measure the degree of concentration in an industry and its dynamic evolution. A general axiomatic basis is developed. We offer new measures of concentration over aggregated periods of time and provide a sound statistical basis for inferences. Concentration is one aspect of the problem of measuring “market power” within an industry. Modern economic analysis of antitrust issues does not focus only on the level of concentration, but still must examine the issue carefully. We contrast concentration at a point in time with a dynamic profile of change in the distribution of shares in a given market. Our methods are demonstrated with an application to the US steel industry.

Vintage structure dynamics and climate change policies: the case of US iron and steel

The US iron and steel industry consists of two main sectors—integrated firms producing outputs predominantly from virgin materials and fossil fuels, and electric arc furnaces operating mainly on scrap and electricity. Capacity and market shares of the former have declined for more than three decades, leading to reductions in energy use and emissions as the existing capital stock is retired. In contrast, electric arc furnace production not only continues to expand along with its capacity expansions but is also able to adopt advanced technology and improve energy efficiencies and carbon intensities. This paper investigates implications of changes in the cost of carbon for output, energy use and carbon emission profiles of the two sectors of the industry, and compares the results for different climate change and technology policies. Special attention is given to the dynamics of the industry's capital vintage structure. The analysis indicates that for the case of the US iron and steel industry, an increase in cost of carbon would result in emission reductions by accelerating the shift to electric arc furnaces. The same emissions reductions as those from cost of carbon increases can be achieved by technology-led policies only under the assumption that very sizeable gaps exist between current and possible energy efficiencies for electric arc furnaces and that their existing capital stock can be rapidly turned-over in favor of less carbon intensive technologies.

Changing environmental strategies over time: An empirical study of the steel industry in the United States

This study investigates how environmental strategies change over time. We submit evidence from the US steel industry that firms have modified their strategies over time. We offer that US industry passed through three stages — cost minimization, cost-effective compliance, and beneficial environmental controls.We compare typologies of environmental strategies and choose that of C. Oliver as the most appropriate. We investigate how environmental strategies in the steel industry changed over time a 4-year period. We offer that a further understanding of Oliver’s strategies may increase understanding of the relationship between business and government on environmental issues.One over-arching problem in our field is the need to adequately operationalize how firms change strategies and pass through different stages. We hope that our study will help future researchers and practitioners better articulate the concepts of environmental strategies over time.Our study focused on the steel industry in the United States. We chose the US steel industry as one of the major environmental actors in the United States. The United States Environmental Protection Agency ranks the iron and steel industry as the largest industrial source of toxic environmental contamination. We encourage researchers to evaluate and test our methodology and findings in other contexts—both in other nations and different industries.

Energy efficiency and carbon dioxide emissions reduction opportunities in the US iron and steel sector

This article presents an in-depth analysis of cost-effective energy efficiency and carbon dioxide emissions reduction opportunities in the US iron and steel industry. We show that physical energy intensity for iron and steelmaking (at the aggregate level, standard Industrial Classification 331, 332) dropped 27%, from 35.6 GJ/tonne to 25.9 GJ/tonne between 1958 and 1994, while carbon dioxide intensity (carbon dioxide emissions expressed in tonnes of carbon per tonne of steel) dropped 39%. We provide a baseline for 1994 energy use and carbon dioxide emissions from US blast furnaces and steel mills (SIC 3312) disaggregated by the processes used in steelmaking. Energy-efficient practices and technologies are identified and analyzed for each of these processes. Examination of 47 specific energy efficiency technologies and measures found a total cost-effective reduction potential of 3.8 GJ/t, having a payback period of three years or less. This is equivalent to a potential energy efficiency improvement of 18% of 1994 US iron and steel energy use and is roughly equivalent to 19% reduction of 1994 US iron and steel carbon dioxide emissions. The measures have been ranked in a bottom-up energy conservation supply-curve.

Energy and material flow models for the US steel industry

We develop calibrated models of energy and material consumption patterns in the US steel industry, starting with an energy end-use model based on 1994 Manufacturing Energy Consumption Survey (MECS) data. Then process-step models of material and energy use are developed and calibrated against the energy end-use model and data from the US Commerce Department and the American Iron and Steel Institute. These models can serve as benchmarks for current steelmaking operations and as base cases for simulating changes in steelmaking energy utilization and waste streams spurred by economics, regulations, or technology innovations.

A Cradle for New Steel Technologies

The U.S. Department of Energy is reducing various risks through its Office of Industrial Technologies (OIT), which shares the cost of developing and implementing technologies that promise to save energy, reduce emissions, and increase productivity of the US steel industry. The OIT signed a compact with the American Iron and Steel Institute and the Steel Manufacturers' Association in May 1995 to collaborate with the U.S. steel industry on three critical research and development areas: process efficiency, recycling, and environmental engineering. Researchers at Oak Ridge National Laboratory in Tennessee developed the nickel aluminide alloy for the rollers, which were centrifugally cast by Sandusky International in Sandusky, OH. This material has superior temperature resistance, which gives it longer service life in the annealing furnace than conventional stainless steel. A phosphor-based sensing technology being tested at Burns Harbor will enable steelmakers to accurately measure the temperature of highly reflective steel strips whose emissivity can skew the readings of optical pyrometers.

Steel phoenix: the fall and rise of the U.S. steel industry

Preface and Acknowledgements - Introduction - The Production of Steel - The Wasted Years: 1959-1974 - Melting Down: the End of 'Big Steel' in the US, 1975-1989 - Pleas for Protection: The Politics of Trade - The Rise of the Minimill - White Knights or Vultures? Foreign Investment in the US Steel Industry - In the Fiery Furnace: The 'Born-Again' Mills - A Whole New Ball Game: The Flat Rolled Minimills - Sadder but Wiser: The Integrated Mills in the 1990's - Steel, the Global Economy, and the 21st Century - Endnotes - Appendices

Cyclical fluctuations and coordination in the US steel industry

The model developed uses a measure of the discrepancy between price and marginal cost to estimate the effects of domestic demand fluctuations on the degree of oligopoly coordination in the US steel industry. Due to the importance of imports, however, domestic demand fluctuations occur whenever market demand and/or import supply shift. Consistent with several recent game-theoretic models, our results show that coordination among US steel producers tends to be weakest when market demand is high and import supply is low.

Made in America? us steelmaking in the 1990s: An American resurgence?

AbstractThis article examines the improved competitiveness of the U.S. carbon steel industry, a sector that has suffered extreme economic difficulty over the last three decades. The article argues that despite the lack of a coherent national steel policy, the US steel industry has significantly increased its competitiveness relative to foreign steel competitors. Four reasons stand out. First and foremost, domestic minimills have provided intense competition for the domestic integrated sector. Secondly, the falling value of the dollar has improved the international position of all US steel firms. Thirdly, US labor costs have been reduced sharply, both through wage concessions by the United Steelworkers and massive layoffs. Finally, joint ventures with Japanese firms have provided traditional firms with cash and new technical innovations.

Mergers and market power in the US steel industry

Studies of the relationship between market structure and market power continue to account for a large segment of the literature. The traditional structure–conduct–performance approach of analysing this issue has been criticized because of its lack of attention to industry-specific characteristic. Adopting an approach which focuses on a single industry, we use data on the US steel industry to analyse the effects of several mergers on the steel market power. Although our results show that market power in the steel industry has been falling in recent years, it does appear that two recent mergers did boost market power.

Technology change in US iron and steel production: Implications for material and energy use, and CO 2 emissions

Recent calls for sustainable practices in industry have highlighted the need to assess the interrelationships between changes in industrial material and energy use, availability and quality of material and energy sources, and emissions. This study provides such an assessment for the US iron and steel industry. It quantifies these relationships using econometric time series analysis of aggregate industry behaviour. The econometric estimates, together with engineering information on production technologies, are embedded in a dynamic computer model and used to simulate material and energy use and emissions profiles for the period 1987–2027. The results indicate that even modest increases in raw steel production rates require unrealistically high rates of iron and steel recycling to reduce energy use and emissions in the long run, even if the historically observed rates of technological substitution and efficiency improvements can be maintained.

Gaining advantage by ‘leaking’ information: Informal information trading

Frequently, managers exchange proprietary data and other types of information with colleagues in other, often rival, companies. Such trading can be of benefit to firms as long as specific rules are followed.Stephan Schrader has conducted an empirical study of informal information trading in the German and US steel industries which shows that managers tend to follow these rules. US managers, however, appear to be more efficient information traders than their German counterparts. Information trading in the oil-exploration industry is also described as an example of how firms can manage such processes.

Cost efficiency in the US steel industry: A nonparametric analysis using data envelopment analysis

In this paper we use nonparametric methods to get upper and lower bounds on the levels of technical and overall cost efficiency in the US steel industry during the period 1958–1986. Possibilities of both non-regressive technical change and ‘no technical change’ have been considered. The empirical analysis shows that the competitive status of US steel producers can be greatly enhanced even within the existing technologies if identified technical and allocative inefficiencies can be eliminated. The evidence does not suggest that cost inefficiency in the domestic steel industry is mainly due to diversion of resources in order to comply with various pollution control regulations.

Industrial Policy in the Presence of Wage Distortions: The Case of the US Auto and Steel Industries

This paper examines the welfare effects of protection in two high wage premia sectors-autos and steel-to determine if protection is justified to correct for the labor misallocation due to the wage premia. If wage premia are exogenous, under most product market structures, labor misallocation is too small to justify protection. More importantly, due to union influence in autos and steel, the wage premium is endogenous. Then wage premia may even exacerbate the welfare costs of protection. With increasing returns to scale and firm entry, optimal policies may be reversed, so further caution must be exercised.

The Restructuring of the US Steel Industry: Changes in the Location of Production and Employment

Recent reorganization of the US iron and steel industry provides a useful setting for an analysis of the relationship between industrial location and institutional forms. Regression analysis shows that institutional shifts in the organization of production dominated geographical shifts in employment and product value as integrated maxi-mills sought to raise productivity. The reorganization of production includes mill abandonment, increased subcontracting by maxi-mills in the initial stages of production, horizontal penetration by mini-mills in the sheet-steel market, and the growing integration of steel finishing and automobile assembly as firms that belong to Japanese corporate groups expand their operations in the USA. Maxi-mills are concentrating investment and production in the Midwest states as their joint ventures with Japanese steel firms specialize in the mass production of galvanized sheets for the automobile industry. Locational shifts also include the national spread of scrap-processing mini-mills and the rapid decline of raw-steel production in Pittsburgh as maxi-mills close furnaces and mills producing construction-grade bars and rods.