The US Steel Industry in 2004: Still in Need of Protection?

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Case Details:

Case Code : ECON006
Case Length : 20 Pages
Period : 2001 - 2004
Pub Date : 2004
Teaching Note :Not Available
Organization : Steel
Industry : -
Countries : USA

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Excerpts

Technological Innovations

Steel making technology had evolved slowly over several decades. Open hearth furnaces (OHF) were used in the early 1900s. Companies that owned huge ore reserves, coke ovens, efficient blast furnaces to make pig iron and large open hearths to make steel had an advantage over others.

The OHFs involved loading the raw materials into a shallow steelmaking hearth open to flames from both ends. The process produced the higher-quality steel needed in automobiles and certain other applications. Following the second world war, the OHF was replaced by the basic oxygen furnace (BOF)...

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Competition

After the second world war, the US steel industry continued its leadership position globally. There was hardly any import of steel into the US as the steel firms in Germany and Japan were destroyed during the war. The US steel industry exported a significant amount of the steel it produced. However, by the late 1950s, Japanese and European steel industries recovered from the war and started exporting to the US...

Consolidation

In the early 2000s, the US steel industry went through a phase of consolidation. Many companies were taken over during this time (Refer Table III). As a result of these acquisitions, around 38 million tons of capacity (around 31 percent of the industry capacity) shifted from small independent firms to larger firms...

Government Protection

Government protection to the steel industry is not new. Since the late 1960s, the US steel industry has been asking for protection from imports and subsidies to help alleviate its troubles. In the 1980s, the government imposed quotas limiting imports to 20% of the US market. The industry was also protected by voluntary restraint agreements on imports. In the late 1990s, the Clinton administration imposed a 12-point plan to protect the domestic industry from 'dumping' of Japanese steel...

The President's Steel Program

In June 2001, the president of the Unites States, George W. Bush announced his Steel Program. The president's steel program consisted of three parts: start negotiating with trading partners to eliminate inefficient excess capacity in the steel industry worldwide; start negotiating with trading partners to eliminate the market distorting practices including subsidies that resulted in excess capacity; and start investigation under Section 201 to determine whether the US industry was harmed by low-priced steel imports...

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