What happened to the American steel industry?

I was talking about this with my friend who is a mechanical engineer, but neither one of us understand the economics behind it. He is very concerned that this is killing American jobs, and would put us at a lot of risk in a war. We still use steel to make our cars, tools, knives, shelves, etc. We use steel far more than any other metal. But it isn’t made in America anymore. We have lots of iron, and lots of coal. Why don’t we make it here anymore?

Because it’s not economically efficient.

Read up on “comparative advantage” — https://en.m.wikipedia.org/wiki/Comparative_advantage

US Steel production has fallen by about 1/3 since 1967, but the US is still the #4 steel producer in the world: https://en.wikipedia.org/wiki/List_of_countries_by_steel_production

Most of the production has shifted to more valuable specialty steels.

nm. Comprehensively ninja’d by beowulff.

Two factors, technology and labor. When the US steel industry was at its height there was no need to upgrade its technology, while others countries were building the latest in steel making plants. When these new plants came on line mostly in Europe they were much more efficient. The high capital costs of steel plants and American labor laws meant that wages grew faster than productivity. Cheap labor allowed plants in Asia to produce steel for less. These two factors meant that US steel making became noncompetitive on price and more and more steel became imported.
The US has never been successfully blockaded and it is hard to imagine a war scenario where it would be, given the current state of the world militarily.

Saying, “Because it’s not economically efficient,” doesn’t really provide any useful level of detail.

The reason that US steel production moved offshore starting in the 1970s is threefold:

[ol]
[li]The costs of labor for steel production in the US grew out of proportion with the price of steel,[/li][li]The costs of energy grew out of proportion with the price of steel, and[/li][li]Domestic demand for steel in the US dropped precipitously.[/li][/ol]

It should be understood that steel is a basic commodity; that is, the end user doesn’t care much about branding (you don’t care whether your steel is Bethlehem, Republic, or US Steel), and steel products are relatively fungible. There are some specialty products that particular manufacturers offered, such as particular styles of flat rail, and high strength or corrosion resistant alloys that may be available from a particular manufacturer, but most common grades of steel are very standardized in both composition and the forms that they come in (flat plate and bar, structural beams and members, sheet, and ingot) so you just buy from whomever gives you the best price. Historical, the major markets have been heavy construction, automobile, agricultural equipment, and large shipbuilding.

Steel production is a fairly labor intensive process (although innovations in the past few decades have made it far less so) and so the lower labor costs offshore in pre-1980s Japan, and more recently in China and India have made it more attractive to produce steel there. At the same time, the production of steel by a coal-fired blast furnace, which is the way most plain carbon steel is made, is a very energy-intensive and air polluting process. The Great Lakes cities primarily identified with steel production, like Cleveland, Bethlehem, Pittsburgh, Gary, Youngstown, et cetera, were also noted for being some with the worst air quality. When the energy crisis and air pollution movements came along, they both put extreme pressure on steel producers, adding to costs at a time when they were also seeing competition from offshore producers.

The demand for steel domestically has also been falling, as both the industries that traditionally have used steel have either declined from their 20th Century peaks (heavy construction, automotive) or moved offshore (shipbuilding, agricultural/construction equipment), and the actual amount of steel used in products such as automobiles and skyscrapers has reduced as producers have sought ways to make these products lighter and more efficient. There is still demand for steel, but it is often higher strength and corrosion resistant steels that are manufactured by smaller mills, used in smaller quantities, to the point that the costs of plain carbon steel has risen dramatically while the costs of some specialty steels has actually fallen (adjusted for inflation).

There is also the rise in use of aluminum as a substitute in many applications where light weight and natural and imparted corrosion resistance is desired, and the reduced strength/cost ratio can be accommodated or is not a concern. Steel will be used as a common structural material for the foreseeable future, but in less quantity per size of product, and likely using more advanced production methods to gain efficiency and reduce pollution from traditional coal-fired blast furnace production. Ultimately, organic materials based on fullerenes will likely replace steel in many capacities a primary structural material in many civil engineering applications, automotive, aerospace, and consumer products once methods for large scale production of fullerenes are developed, but this is still likely decades away.

Stranger

The biggest American steel company is Nucor. It melts existing steel into new steel. Most of the scrap steel comes from junked cars, of which there are plenty in the US.

Also, one of the things that doomed the steel companies is that they had enormous pension obligations; they had many more retirees than current employees and the retirees had defined benefit pensions. Nucor offers a 401(k) instead of a defined benefit plan, so the company does not have any obligations beyond the matching employer contributions.

The depletion of the higher-quality iron ore deposits in the Minnesota Iron Range may also have been a factor. The industry had to convert to the harder and more expensive to process taconite.

Some steel industry folks closed rather than adopt the emission standards.

It is not a clean industry.

All of the above can be equally applied to the British and European steel makers. I see that the UK government is going to use taxpayer’s money to subsidise the industry - we can all guess how that will end up.

The worry is that when all steel manufacturing is in Asia, prices will start to climb. Home grown industry like car manufacture will then suffer as the raw material gets more expensive. Of course this may trigger development of alternatives to steel, just as expensive oil did for fuel.

Here’s a good book on the subject: A Nation of Steel: The Making of Modern America by Thomas J. Misa 1995