29 Jul WHAT MIGHT STEEL MAKERS DO TO BETTER COPE WITH THE CYCLICAL NATURE OF DEMAND?
The United States steel industry For decades, the United States steel industry was in deep economic malaise. The problems of the industry were numerous. Beginning in the 1970s , falling trade barriers allowed cost-efficient foreign producers to sell steel in the United States , and they were taking market share away from once dominant integrated steel makers, such as U.S. Steel, Bethlehem Steel, and Wheeling-Pittsburg. To make matters worse for incumbents, there was also new domestic competition in the form of mini-mills. Mini-mills were small steel makers who used electric arc furnaces to smelt and produce scrap steel , often at a significantly lower cost than large established companie s. Because they did not use iron ore, mini-mills did not need to invest in bl ast furnaces to smelt iron ore (blast furnaces are very capital intensive). The average mini-mill was approximately one tenth of the size of a large integrated mill, used nonunion labor, and was typically located in rural communities where labor costs were relatively low. Scrap steel was in plentiful supply and priced low. Initially, most mini-mills produced low-grade construction steel, although they have m oved into higher-grade steel in recent years. If the expansion in supply from foreign comp anies and mini-mills wasn’t enough, demand for steel was also contracting as cu stomers switched to substitutes, including aluminum, plastics, and composites. The combination of growing supply a nd shrinking demand resulted in excess capacity. Indeed, at one time, as much as 45 % of the steel-ma king capacity in the United States was excess to requirements. As steel makers struggled with exce ss capacity, they slashed their prices to try and capture more demand and cover their fixed costs, onl y to be matched by rivals. The result was intense price competition and low profits. In addition, customers, for whom steel was mostly a commodity type input, could easily switch demand from company to co mpany, and they used this leverage to further bargain down prices. To make matters worse, establ ished steel makers were typically unionized, and a combination of high wage rates and inflexible work rules raised labor costs, making it even more difficult to make a profit in this brutally competi tive industry. Strong unions, to gether with the costs of closing a plant, were also an impediment to reducing excess capacity in the industry. The steel industry rarely made money. Many of the old integrated st eel making companies ultimately went bankrupt, includ ing Bethlehem Steel and Wheeling-Pittsburg. Then, in the early 2000s, things started to change. There was a surge in de mand for steel from the ra pidly developing economies of China, India, Russia, and Brazil. By 2004, China alone was consuming almost one third of all steel produced worldwide, and demand there was grow ing by more than 20% per year. Moreover, two decades of bankruptcies and consolidation had finally removed much of the ex cess capacity from the industry, not just in the United States, but also worldwide. In the United States, the producers that survived the decades of restructuring were efficient enterprises with productive workforces and new technology. Now finally competitive, for the first time, steel producers were able to hold their own against foreign imports. A decline in the value of the U.S. dollar after 2001 helped make steel imports relatively more expensive, and helped to create demand for steel exports from the United States. As a result of this changed competitive environment,prices and profits surged. Hot rolled steel plate, for example, was priced at $260 per ton in June of 2003. By June of 2008, it had increased to $1225 per ton! In 2003, U.S. Steel, the country’s largest steel producer, lost $406 million. In 2008 it made $2 billion in net profit. Nucor Steel, long regarded as the most efficient steel maker in the country, saw its profits increase from $63 million to $1.8 billion over the same period. However, in late 2008 and 2009 demand for steel slumped again as a deep recession gripped the
Our website has a team of professional writers who can help you write any of your homework. They will write your papers from scratch. We also have a team of editors just to make sure all papers are of HIGH QUALITY & PLAGIARISM FREE. To make an Order you only need to click Ask A Question and we will direct you to our Order Page at WriteDemy. Then fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Fill in all the assignment paper details that are required in the order form with the standard information being the page count, deadline, academic level and type of paper. It is advisable to have this information at hand so that you can quickly fill in the necessary information needed in the form for the essay writer to be immediately assigned to your writing project. Make payment for the custom essay order to enable us to assign a suitable writer to your order. Payments are made through Paypal on a secured billing page. Finally, sit back and relax.
About Writedemy
We are a professional paper writing website. If you have searched a question and bumped into our website just know you are in the right place to get help in your coursework. We offer HIGH QUALITY & PLAGIARISM FREE Papers.
How It Works
To make an Order you only need to click on “Order Now” and we will direct you to our Order Page. Fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Are there Discounts?
All new clients are eligible for 20% off in their first Order. Our payment method is safe and secure.