Steel Works, Blast Furnaces

SIC 3312

Companies in this industry

Industry report:

This classification includes establishments primarily engaged in manufacturing hot metal, pig iron, and silvery pig iron from iron ore and iron and steel scrap; converting pig iron, scrap iron, and scrap steel into steel; and in hot-rolling iron and steel into basic shapes, such as plates, sheets, strips, rods, bars, and tubing. Merchant blast furnaces and by-product or beehive coke ovens are also included in this industry. Establishments primarily engaged in manufacturing ferrous and nonferrous additive alloys by electrometallurgical processes are classified in SIC 3313: Electrometallurgical Products, Except Steel.

Industry Snapshot

According to Dun & Bradstreet, 2,356 blast furnaces and steel mills operated in the United States in 2010. Together these companies generated $83.1 billion in annual revenues. Although 82 percent of firms employed fewer than 50 people, those that employed more than 50 workers accounted for approximately 75 percent of industry revenues. California was home to the most establishments in the industry, followed by Texas, Pennsylvania, Ohio, and Michigan. Pennsylvania accounted for the largest percentage of industry revenues (31 percent), North Carolina claimed 19 percent, and Ohio held 18 percent.

Organization and Structure

Steel companies are involved in the manufacture of hot metal, pig iron, and silvery pig iron from iron ore, iron, and steel scrap. They also convert pig iron, scrap iron, and scrap steel into steel, and turn hot rolling iron and steel into plates, sheets, strips, and bars. These end products are purchased by companies in other industries, which usually shape and manipulate the steel to create finished products.

Products offered by steelmakers are classified into five categories according to the manner in which they were processed and their chemical compositions. Carbon steels are used mostly for flat-rolled products because they are highly malleable. Machines, auto bodies, ships, and building structures are made with this type of steel. Carbon steels account for about 54 percent of U.S. steel production. Alloy steels, which make up about 10 percent of the market, integrate elements into steel to enhance its physical properties. Corrosion resistance, greater strength, and increased conductivity are a few of the advantages offered by some alloys.

Stainless steels are highly resistant to rust and may be stronger or offer resistance to temperature changes compared to carbon and alloy steels. Stainless steel is often used in pipes, tanks, and in the medical field, and accounts for 4.7 percent of steel market volume. Tool steels and high-strength low alloy (HSLA) steels accounted for less than 1 percent of industry production. They are used in applications in which strength and weight are critical.

Integrated Manufacturers versus Minimills.
Steel manufacturers can be divided into two camps: traditional integrated mills and non-integrated "minimills." Integrated steel mills undertake every step of the steel-making process. These facilities typically begin by converting mixtures of iron ore, limestone, and coke (made from coal) into molten iron using a blast furnace. Basic oxygen furnaces (BOFs) are then used to convert the molten iron into steel, which is cast into ingots. Ingots are then shaped into slabs, billets, or blooms of steel.

Increasing numbers of integrated mills in the 1990s used a process called continuous casting to bypass the production of ingots and cast billets, slabs, and blooms directly from molten iron. Compared to the old ingot teeming process, continuous casting is less complicated and yields a superior product. In this process, molten steel from a furnace is quickly carried in a ladle directly to a refractory lined container, or tundish, at the top of the caster. The molten metal is then poured into the tundish, which feeds it continuously into the caster, the core of which is a water-cooled mold open at both ends. When molten steel enters one end of the mold and cools, a "skin" of metal forms around a liquid core. The material leaves the other end of the machine and is further cooled by water sprays, solidifying the metal. Continuous casting cuts production time, consumes less energy, and increases yield. Operating costs are estimated to be cut about $30 a ton. Steelmakers next convert the finished or semi-finished steel into rolls, plates, bars, tubes, rails, or other more marketable products, especially for the auto industry, at a rolling mill. By 1995 every major U.S. manufacturer relied on continuous casting.

In the 1990s, minimills, or nonintegrated facilities, used the same process as integrated mills with a few exceptions. Rather than process base materials like iron ore, coke, and limestone, minimills typically start with scrap iron or steel. The scrap, melted in an electric arc furnace (EAF) rather than a blast or basic oxygen furnace, is continuously cast into blooms and billets. Minimills typically produced fewer finished products than integrated mills. Although many manufacturers broadened their offerings to include steel pipes, plates, and sheets, most minimills emphasized rods and bars used in light construction.

Minimills are capable of producing between 150,000 and 2 million tons of steel a year. In contrast, most integrated mills can generate 2 to 4 million tons a year. Minimills are also typically able to produce steel at a much lower cost than their larger cousins. For instance, because minimills do not have to be located near supplies of raw ingredients they are able to operate closer to their customers, which reduces product transport costs. In addition, more minimills are located in the southern United States and benefit from less expensive, non-union labor. Integrated mills, on the other hand, employ union labor. Union contracts prevent integrated companies from reducing compensation costs when production declines due to lowered demand. Furthermore, minimills are apt to employ more advanced technology, such as continuous casting and EAFs, that reduce production costs and improve quality.

Competitive Structure.
Integrated steel producers have steadily lost market share to minimills. In 1992 integrated steelmakers accounted for approximately 75 percent of U.S. steel industry production. In 1998 integrated steelmakers accounted for only 55.4 percent of U.S. steel production, compared to more than 90 percent in 1960. Minimills, on the other hand, increased their share of production from 8.4 percent in 1960 to 44.6 percent in 1998.

Compared to minimills, integrated steelmakers are more capital- and labor-intensive. Minimills spent an average of about $500 in capital costs per ton of steel produced in the late twentieth century, while integrated mills incurred about $2,000 per ton. Likewise, minimills generated about $32 in operating profit per ton of steel, compared to $3 per ton for integrated mills. The availability of inexpensive scrap steel also was a factor in keeping costs down at minimills. Minimills were able to achieve greater labor productivity than integrated mills, partly because they employed nonunion labor. The domestic steel industry remained fairly concentrated as the nation entered the twenty-first century, but was a far cry from the oligopoly characteristic of the early twentieth century.

Background and Development

American Colonial Times.
Steel is an alloy of carbon and iron that is harder and stronger than iron. The first ironworks were established in British North America in Jamestown, Virginia, in 1621, and the Saugus ironworks was established in Massachusetts in 1645. By the beginning of the eighteenth century, iron making was under way in almost every colony. Despite English Parliamentary acts that tried to restrict the burgeoning industry, manufacturers in North America continued to build new iron mills and eventually built finished steel mills during the 1700s. Iron production in this early period entailed the use of charcoal fuel or water power, along with a small labor force, to melt iron ore in a blast furnace. Entrepreneurs could start a mill with several hundred dollars. By 1800, approximately 84,000 tons of iron were being produced in North America.

The Steam Age.
The Steam Age in the early nineteenth century created a huge demand for iron. Up to that time most iron mines, forges, and blacksmiths were small operations. Steam created a demand for rolled iron to be used in making boilers. In addition, more than 30,000 miles of railroad track with iron rails were laid in the United States between 1830 and the outbreak of the Civil War in 1861. As a result, iron mills became major enterprises.

The production process changed very little in the 1800s, although advances in transportation freed the industry from many geographical constraints. The U.S. steel industry did not develop on its own until after the Civil War. Up until that time steel was too expensive to manufacture by the methods then available. Its use prior to the Civil War was confined primarily to high-value products, and the United States imported nearly all its steel until after the war ended.

Two inventions in the 1850s resulted in the rapid rise of the steel industry, which supplanted the iron industry by the end of the nineteenth century. One was the Bessemer process for making steel, developed by British engineer Henry Bessemer in 1856. The second was the Siemens-Martin open-hearth method, introduced in 1858. Once perfected, these processes greatly reduced the cost of producing steel. The first Bessemer converter in the United States was built in 1864, and the first open-hearth furnace, which was better suited to U.S. iron ore, was built in 1868. These stimulated steel production in the United States. By 1873 the United States produced nearly 115,000 tons of steel rail, which was approximately one-eighth of all U.S. rail production. As the price of steel continued to drop, steel rails replaced the iron rails that became brittle and required frequent repairs. The iron age was over.

The Early Twentieth Century.
Toward the end of the nineteenth century the structure of the industry changed as it became more concentrated and the number of firms decreased. Between 1880 and 1900, U.S. steel production increased from 1.25 million tons to more than 10 million tons. The industry consolidated as mill owners sought economies of scale. Led by Andrew Carnegie, Henry Clay Frick, Charles Schwab, and others, the modern steel industry took shape. Companies like Bethlehem Steel and Illinois Steel Company were born. It was also during this time that the first steel import tariffs were implemented and trade associations were organized. Many bitter and deadly labor disputes rocked the industry during the late 1800s and early 1900s, especially the Homestead Strike of 1892, and the steel industry was not fully unionized until the 1930s. In 1901 financiers J. Pierpont Morgan and Elbert H. Gary formed the United States Steel Corporation. With a capitalization of $1.4 billion, it was the largest industrial enterprise in the world. By 1910 the United States was producing more than 24 million tons of steel, far more than any other country.

In the early 1900s, the development of the open-hearth furnace (OHF) made it possible for companies to produce higher quality steel and to use scrap metal in the production process. Improved steel quality was an important advantage for firms that were trying to serve the needs of the nascent automobile industry. The massive growth in demand for new steel during the early 1900s, particularly in the 1920s, was a boon to the industry. After suffering setbacks during the Great Depression, when more than 50 percent of U.S. steel production capacity stood idle, steel markets expanded significantly during World War II.

Post-World War II.
In the 30 years following World War II, U.S. steelmakers dominated the global steel industry. In addition to the fact that many European and Japanese producers had been stifled by damage during the war, U.S. plants were technologically superior. Additionally, U.S. facilities were an average of over three times larger than those in other industrialized nations. In 1950 more than 45 percent of the world's raw steel was produced in the United States. U.S. firms produced about 90 million tons of steel compared to about 30 million tons produced in Europe and less than 5 million tons produced in Japan.

Because U.S. firms enjoyed great economies of scale and technological supremacy, their steelworkers were undoubtedly the highest paid in the world. U.S. manufacturers had immediate access to the fastest-growing economy in the industrialized world. These and other factors helped push U.S. steel production from around 90 million tons in 1950 to nearly 140 million tons by the 1970s. Although the U.S. steel industry maintained a significant lead over the European Community (EC) and Japan from the 1950s through the 1970s, companies in those two areas quickly caught up with their U.S. counterparts. By 1970 the EC and Japan were producing about 120 million and 90 million tons of steel a year, respectively.

Despite its size and rapid growth, the U.S. steel industry began experiencing problems in the 1960s and 1970s. In addition to high labor costs, slowing growth in domestic markets, and a declining world market share, the industry also began to pay the price for failing to invest the resources necessary to maintain its technological lead. Most companies, for example, were slow to convert their operations to more productive basic oxygen furnaces (BOFs), which were replacing the OHFs. Despite a flurry of capital investment by steelmakers in the late 1960s, by the mid-1970s it was clear that U.S. companies had lost their leadership role among world steel markets.

Post-1970s.
The U.S. steel industry experienced its first significant reversal in the mid-1970s. A rise in energy prices was one of the most significant factors that contributed to the industry's decline. In 1975, after oil prices had jumped from $3 to $12 per barrel in less than two years, U.S. steel production dropped 20 percent. To make matters worse, U.S. companies had substantially increased their production capacity in anticipation of strong market growth, which was an unfortunate miscalculation. High labor costs continued to plague U.S. competitors as well, adding to their comparative inefficiency in the global market.

Other miscellaneous factors had a negative impact on industry profits. Environmental regulations, for example, forced the industry to spend a peak of nearly $400 million in 1981 to reduce pollutants. In addition, government-subsidized imported steel cut into domestic market revenue. The dumping problem became so severe that the U.S. government enacted Voluntary Restraint Agreements (VRAs) in the early 1980s, which essentially amounted to anti-dumping legislation for 29 importing countries. Steel substitutes further reduced steel's market share. For instance, the average amount of steel and iron contained in an automobile fell from 2,535 pounds in 1977 to 1,757 pounds in 1992, but the average amount of plastic in an automobile rose from about 180 pounds to 245 pounds.

The proliferation of minimills also added to the woes of large steel producers. Although minimills had originated in the 1960s, by the late 1970s these facilities had begun to compete directly with large producers in specific market niches. The more efficient and technologically superior minimills especially benefited from EAFs, which proved much more productive than even the BOFs in which large manufacturers continued to invest. As a result, the market share of the top six producers declined from 64 percent in 1980 to about 50 percent by 1990.

The end result of the problems affecting the industry was decreased production and profits beginning in the late 1970s and continuing throughout most of the 1980s. Total U.S. steel production declined from a peak of 136 million tons in 1979 to a low of about 81.5 million tons in 1986. U.S. manufacturers' share of world steel production plummeted from over 17 percent in 1976 to about 11 percent in 1990. Furthermore, industry employment plummeted from about 300,000 in 1982 to less than 190,000 by 1990. Industry profits fell more than $1.8 billion in 1985, followed by a staggering loss of nearly $4.2 billion in 1986. Although industry net income jumped to more than $1 billion in 1987, profits remained relatively stagnant throughout the decade.

Industry Restructuring.
In response to the metamorphosis of steel markets, U.S. producers launched a major industry restructuring in the 1980s. Companies greatly increased investments in new production technologies. Integrated mills alone invested $23 billion in the 1980s to modernize their plants. The percentage of steel produced in older OHFs, for instance, fell from nearly 20 percent in 1977 to less than 5 percent by 1990. During the same period, steel produced using efficient EAFs increased from just over 20 percent to nearly 40 percent. Significantly, manufacturers increased the amount of steel that was produced using continuous casting from just 15 percent in 1980 to more than 75 percent by 1991, nearing the levels found in the European Community and Japanese industries.

U.S. steelmakers made important gains in other areas as well. Investment in pollution controls declined to just over $100 million in 1990, although they began to rise again in the early 1990s. Manufacturers also succeeded in stabilizing their labor costs, although it was estimated that labor represented 28 percent of the cost of production in 1994. Large investments in automation, however, had helped to bring labor expenses in line with overseas competitors. Also bolstering industry competitiveness was the success of highly efficient minimills that could produce steel nearly twice as quickly as integrated facilities. By 1995, minimills represented 40.4 percent of industry production.

Domestic producers succeeded in reducing steel dumping by importers via legislation, including the VRAs. Furthermore, U.S. companies increased the quality of their products by investing in new production technology. For instance, they developed new products that allowed them to compete with many plastic substitutes. New steel products were offered that had the corrosion resistance and weight advantages of many plastics, yet cost less to create.

As a result of restructuring during the 1980s and 1990s, U.S. steel companies in 1996 were the third most productive in the world. Manufacturers had dramatically reduced the average amount of labor required to produce 1 ton of steel from 11 labor hours in 1982 to 3 labor hours in 1994, less than both Japanese and European producers. At least one study estimated that pretax production costs in the United States were lower than costs in any other major steel-producing nation except Great Britain. In addition, exports reached a peak of 8 percent of production in 1992, despite a decline of over 5 percent in foreign demand since the late 1980s, and then slowed to 7 percent in 1995. At the same time, an upturn in the U.S. economy in 1995 and early 1996 buoyed domestic demand.

By the mid-1990s, the U.S. steel industry was in good economic shape. Restructuring continued during the 1990s, and from 1992 to 1998 the steel industry spent a collective $50 billion to modernize its plants. Steel companies improved their financial position by reducing debt, underfunded pension plans, and other liabilities. After two strong years, industry performance slackened slightly in 1996 as some plants suffered breakdowns after running at full capacity. Raw steel production during 1996 was 99.4 million tons, up from 97.1 million tons in 1995. Steel shipments rose in 1997 to 105.9 million net tons, then fell 3.5 percent in 1998 to 102.1 million tons.

Strong demand in the United States for steel in 1997 and 1998 resulted in a significant increase in imported steel of various kinds. Cheap imports from Russia, Japan, Brazil, and other countries forced the price of commodity-grade steel down more than 10 percent. To prevent other countries from dumping steel in the U.S. market, the U.S. steel industry filed antidumping petitions with the U.S. International Trade Commission of the U.S. Department of Commerce, and the International Trade Administration. "Dumping" refers to the practice of one country selling commodities or finished products in another country at below cost or fair market value. Since 1980 the steel industry has used antidumping complaints as a tool to curb imports, and in 1998 the industry filed complaints against Japan, Russia, and Brazil.

The major markets for flat-rolled steel are automotive, construction, and industrial machinery and equipment production. These markets enjoyed increased production during the 1990s, resulting in growing demand for steel. High levels of vehicle production and increasing truck share, which are more steel-intensive than automobiles, explained much of the strength in steel volume toward the end of the twentieth century.

Steel prices dropped due to a combination of softer demand, a drop in domestic steel operating rates, a steep decline in scrap prices, competitive pressures from imports, and expanded domestic capacity. However, steel prices started to rise in 1999 as the major producers announced price hikes. The steel industry's profitability continued to be affected by a wave of low-priced steel imports in 1999, with most of the major companies posting losses.

Steel in the Twenty-First Century.
The steel industry remained highly competitive into the early twenty-first century. Domestic producers faced competition not only from foreign steelmakers but also from substitute materials, such as glass, ceramics, aluminum, and plastics. Excess global capacity put pressure on U.S. steelmakers, despite the many antidumping complaints being filed. Any increase in steel prices acted as a stimulant to encourage even more expansion of low-cost capacity.

Integrated steelmakers, which were under severe profit pressure, were expected to reap the most benefits from increased prices. Nevertheless, analysts expected that minimills would continue to gain market share and significantly outperform integrated facilities. Minimills promised to pose a growing threat as they expanded their offerings to include flat-rolled sheet steel and large structural products, which were formerly the domain of integrated producers. Furthermore, rapid advances in minimill production technology allowed this sector to compete with integrated manufacturers in a growing number of markets.

Direct steelmaking was predicted to be the most likely long-term solution to problems caused by the capital-intensive nature of the integrated steelmaking process. The widespread implementation of the direct steelmaking process would also eliminate the need for coke ovens, many of which were badly in need of being rebuilt and were the source of harmful emissions. One direct-process plant began operation in 1989. Located in Pittsburgh, this experimental facility was capable of producing 5 tons of steel an hour. It used a coal-based, continuous in-bath melting process that substituted a single vessel for coke ovens, blast furnaces, and basic oxygen furnaces. This technique's energy requirements are about 20 percent lower than those of conventional steelmaking, which uses three separate processes. A second, larger experimental facility was completed in 1995, and several foreign competitors have built similar plants.

In 2001 the U.S. steel industry shipped 88.1 million metric tons of raw steel. By grade, carbon accounted for 86 percent; alloy, 11 percent; and stainless, 3 percent. Electric furnaces were used for 42 percent of production, while basic oxygen, open hearth, and other types of furnaces were used for the remaining 48 percent.

With little commercial or industrial growth during the early years of the 2000s, the steel industry experienced a significant lack of demand. Combined with worldwide oversupply, prices plummeted. During 2001, 14 percent of the industry's mills were idled or closed. However, the George W. Bush administration stepped in to apply tariffs to inexpensive imported raw steel in an effort to even the playing field because many major steel-producing countries, including China, provided subsidies to their steel industries. Unable to compete in price, imports flooded the marketplace, and U.S. producers were left with too much steel and too few buyers. The tariffs slowed the influx of steel, although Canada, which exported the most steel to the United States, was exempt from the tariff under the terms of the North American Free Trade Agreement (NAFTA). Between 1997 and 2002, at least 32 U.S. steel companies filed for bankruptcy. The decreasing number of industry businesses, combined with the effect of the tariffs, helped steel prices and demand rebound during 2002.

Although applauded by the steel industry, which was in desperate need of some relief, the tariffs affected only raw steel, not finished products. Thus, companies in the United States that relied on raw steel to manufacture finished products reported an increase in the cost of their materials. These end users had to either absorb the increased cost or pass it on to their customers. In turn, their customers could choose to pay more or simply look overseas for the same finished product at a lower price.

Between 1977 and 2000, the steel industry lost more than 350,000 jobs, and in the early twenty-first century, the industry was in turmoil. Industry analysts agreed that one of the predominant problems of the U.S. steel industry was fragmentation, which led to production overcapacities and inefficiencies. However, significant consolidation was underway, including the merger of U.S. Steel Corp. with National Steel Corp., and Bethlehem Steel Corp. with International Steel Group. As a result, by 2003 three companies (U.S. Steel, International Steel, and Nucor) controlled 60 percent of the U.S. steel production. Consolidation efforts were thwarted by sluggish economic conditions but were expected to regain momentum as the economy improved.

In 2003 the U.S. steel industry's shipments rose to 83.7 million metric tons of raw steel. Although some relief came from the George W. Bush administration's imposed tariffs, it was offset by the exemption of 727 steel products by the Department of Commerce. That trend was brief as the industry rebounded, with shipments rising to $77.88 billion in 2005, a significant increase over $44.42 billion in 2002.

Reorganization within the steel industry continued with mergers and consolidations. Nucor Steel acquired Trico and Birmingham Steel in 2002, and Steel Dynamics acquired Qualitech in September 2002. Other mergers and consolidations included the formation of Gerdau-AmeriSteel from Co-Steel in Canada, as well as other steel mills in the U.S. In April 2002 International Steel Group (ISG) acquired all the assets of LTV Steel, and then acquired Acme Steel in October 2002, Bethlehem Steel in May 2003, and Weirton and Georgetown in 2004. U.S. Steel Corporation acquired National Steel in January 2003, increasing its total steel production 19.5 million tons annually. Consolidation continued with the acquisition of Corus Tuscaloosa by Nucor in June 2004, resulting in increased production capacity of 16.6 million tons. However, the most significant acquisition occurred in October 2004, when Ispat International acquired LNM Holdings to form Mittal Steel Company, which acquired ISG in 2005, creating the world's largest steel producer by volume. The following year Mittal Steel merged with Arcelor, forming a company called ArcelorMittal. Another notable acquisition was that of Rouge Industries and its subsidiary, Rouge Steel Company, in Detroit, Michigan, by Russian competitor OAO Severstal and its U.S.-based subsidiary, Severstal North America, in January 2004.

The George W. Bush administration surrendered to increased international pressure and revoked the Section 201 steel safeguard program early in December 2003, reasoning that the steel industry had ample time to consolidate. As a result, the worldwide steel industry reverted to its prior competitive global marketplace. Steelmakers wanted additional time to complete what they had started. It would not be long before less expensive imports would again flood the domestic market.

During 2004 spot prices for hot-rolled steel rose from a low of $220 per ton to a high of $800 per ton. They closed the year at $600 per ton, which translated into profits for the steel mills.

Nearly all of the major companies posted gains in 2004 compared to significant net losses the preceding year. Although the steel industry began 2005 with a surplus, increasing price pressures for raw materials, and rising energy costs resulted in similar projections for 2005.

When the price of ferrous scrap fell in May 2005, steel mills followed suit and dropped their raw material surcharges as well. Although scrap prices remained volatile, steel mills focused on maintaining competitive pricing. For example, industry leader Nucor dropped its price on rebar $70 per ton at the same time scrap fell $70 per ton. Other steel mills followed in an effort to keep their customers from buying products from foreign competitors. In addition, AK Steel Holding Corp. decreased its cost of flat-rolled carbon steel products for June shipments, citing price decreases for scrap materials. Overall, the steel industry remained focused on maintaining its dominant domestic market presence to secure its customer base.

Shipments for iron and steel mills were valued at $118 billion in 2008, a dramatic leap from $44.42 in 2002. The iron and steel mill and ferroalloy manufacturing industries had approximately 3,662 establishments primarily engaged in manufacturing hot metal, pig iron, and silvery pig iron from iron ore and iron and steel scrap; converting pig iron, scrap iron, and scrap steel; and in hot-rolling iron and steel into basic shapes. The industry employed 114,400 workers in 2005, down from 121,302 in 2002. States with the majority of foundries included California, Texas, Ohio, Florida, and Pennsylvania.

Iron and steel locomotive and car wheels represented the largest sector in this industry in 2008, accounting for 30 percent of the market. Blast furnaces and steel mills accounted for 15.1 percent of the market, followed by tool and die steel that held 10.2 percent of the market. Stainless steel stood at 7.3 percent of market share, while tool and die steel and alloys captured a 5.3 percent share.

According to the December 2008 issue of Metal Bulletin, "2008 will be remembered as the year the bubble burst for most of the world's major steelmakers as demand and prices fell off a cliff in the wake of the implosion of the credit markets." Industry leaders that were reaping in revenues and operating at full capacity found themselves cutting production and shedding their workforce.

At the end of the first decade of the 2000s, the American Iron and Steel Institute reported that U.S. steel imports had fallen to levels not reported since 1975. Even with a decline in applications, steel imports captured 28 percent of market share, whereas domestic production slowed to 49 percent of capacity. According to the U.S. Commerce Department, imported steel fell 13.8 percent between July 2009 and August 2009. Steel imports fell 66.5 percent in August 2009 over August 2008.

Reduced domestic inventories and production led to increased metal prices. One industry leader, U.S. Steel, raised its prices three times between June and July 2009, as did Alcoa, which increased aluminum prices 6 percent in 2009.

In mid-2009, previously idled blast furnaces were fired up, which indicated steel demand was beginning to recover from the severe economic recession. U.S. Steel restarted one of its Canadian blast furnaces in August and had another scheduled to fire up at Great Lakes Works in Ecorse, Michigan. ArcelorMittal also reopened idled plants to keep capacity "in line with improving demand, largely due to the technical recovery occurring as inventory destocking nears completion," according to a company spokesperson in the September 2009 issue of Purchasing magazine, adding that "the firm doesn't expect demand to return to the levels seen in 2008 for some time yet--and remains cautiously optimistic for a slow and progressive recovery."

In the meantime, U.S. steel producers waited to see if the Waxman-Markey bill, also known as the climate-change bill, which would add $1 billion to production costs by 2030 if passed, would become a reality. The bill was designed to cut carbon emissions 17 percent by 2020 and more than 80 percent by 2050. Steel producers estimated their revenues could fall 2 to 5 percent if the bill was passed. In the summer of 2010 however, the bill died, as the Senate focused on cleaning up the historical Deepwater Horizon oil spill that occurred that April.

Current Conditions

According to the American Iron and Steel Institute, domestic raw steel production increased 14.6 percent from 1,647,000 tons for the week ending August 20, 2010 to 1,888,000 net tons for the week ending August 20, 2011. The capability utilization rate was up from 68.1 percent for the same week in 2010 to 77.2 percent for the same week in 2011. Production for the week ending August 20, 2011, was up 0.3 percent from the previous week ending August 13, 2011, when production was 1,883,000 tons and the rate of capability utilization was 77 percent.

This industry is highly volatile, depending greatly on global supply and demand, with steel prices changing with global economic activity. A recovery was expected between 2011 and 2016 following plummeting demand from downstream industries that had taken a toll on the industry in the first decade of the twenty-first century. Most significantly, the rising price of steel and growth in new technologies were predicted to benefit iron and steel manufacturers. However, conditions were expected to remain challenging for many higher-cost steel manufacturers, particularly those that operated blast furnaces and carried legacy costs.

Industry Leaders

In 2010 the steel industry was dominated by only a few companies. Chicago-based ArcelorMittal USA Inc. was the nation's top steel producer. It operated 20 facilities in the United States, mostly in the Midwest. Its parent company, ArcelorMittal of Luxembourg, was the largest steel producer in the world, producing 85 million tons of steel annually and posting revenues of $78 billion in 2010. The second-largest steel producer was the United States Steel Corporation (formerly USX-U.S. Steel Group), in Pittsburgh, Pennsylvania. U.S. Steel had revenues of $17.3 billion in 2010 and 42,000 employees. The company's annual capacity was about 32 million tons of steel a year, although its actual production was lower. Another significant company was AK Steel Holding of West Chester, Ohio, with 2010 sales of $5.9 billion and 6,600 employees.

The third-largest U.S. steel producer was Nucor Corporation of Charlotte, North Carolina, which posted 2010 sales of $15.8 billion and employed 20,500 people. Nucor was one of the most progressive steel producers at the beginning of the twenty-first century. In contrast to most of the large producers, Nucor produced steel in minimills. The company was also one of the most profitable of the large producers and continued to build facilities. Established in 1967 with a single mill in South Carolina, Nucor had added five plants by 1991 with an annual production capacity of about 4 million tons. Using state-of-the-art technology, such as EAFs and continuous casting, Nucor was able to produce steel from scrap at a fraction of the cost incurred by its larger competitors.

Nucor also led the industry in expanding the markets served by the minimill sector. In the early 1990s, the company broke into the flat-rolled steel market, which previously was controlled entirely by integrated producers and accounted for about 45 percent of production. To produce this sheet steel, Nucor utilized a new technique called thin-slab casting. In this process, a machine employs a funnel-shaped mold to squeeze molten steel down to a thickness of 1.5 to 2 inches. This eliminates the need for primary stands that reduce the larger slabs, typically 8 to 10 inches thick, produced by conventional casters. This method proved to be much less costly than conventional casting methods. Nucor's thin-slab casting operation became profitable in June 1990, only 10 months after it started production, and operated at a maximum capacity of 800,000 tons per year by 1992.

In July 1992, Nucor opened a $330 million, 1 million ton per year, thin-slab casting sheet plant in Arkansas. By 1996 the new plant and Nucor's Indiana plant were operating at full capacity. In addition to its moves in the sheet steel market, Nucor constructed a mill in partnership with Yamato of Japan to roll wide-flange beams, a product produced primarily by integrated mills in the early 1990s. At the end of the first decade of the 2000s it expanded by purchasing The David J. Joseph Company for a mere $1 billion. By that time Nucor was producing 15 million tons of steel a year.

Workforce

Labor productivity in the U.S. steel industry tripled between 1980 and 1998, from an industry-average of 10.1 man-hours per ton in 1980 to 3.2 man-hours per ton in 1998. Many North American facilities were able to produce a ton of finished steel in less than two man-hours per ton and some in less than one man-hour. These factors, combined with a reduction in demand beginning in the late 1980s, dealt a lethal blow to many jobs in the industry. Automation was expected to increase and continue the trend for fewer workers needed in the industry. Jobs in the iron and steel mills and ferroalloy manufacturing industry declined from 121,302 in 2002 to 102,422 in 2005. According to the U.S. Census Bureau, by 2009 employment had reached 98,204, of which about 80 percent were production workers earning an average of $29.70 an hour.

America and the World

According to the World Steel Association, the United States was the world's third-largest crude steel producer in 2010, producing 80.4 million metric tons (mmt) that year. China was number one by far, producing 626.6 mmt, followed by Japan with 109.5 mmt.

Research and Technology

Rather than expand production capacity, producers at the beginning of the twenty-first century relied on new technology to help achieve greater efficiency and quality. Because the overall global steel market had matured, companies could grow only by increasing market share, raising profit margins, or developing new steel products.

In addition to continuous casting, thin-slab casting, and EAFs, companies experimented with a variety of new production techniques. For example, an array of devices were used to help companies spot, map, describe, and classify defects in sheet steel that were as small as 0.02 inches in diameter. Strobe lights, laser beams, and artificial intelligence systems were all at work ensuring higher-quality output. Furthermore, continued advances in alloys and steel coatings allowed manufacturers to create new steel products that could compete with advanced plastics and ceramics.

Nucor began to experiment with an electromagnetic braking system, designed to improve surface quality of the sheet by reducing turbulence in the mold. Less turbulence was expected to result in fewer surface defects and allow greater casting speed. In addition, AK Steel pioneered an oxygen-blowing technique that showed some promise in the struggle to become more competitive. AK Steel uses a form of oxygen injection in its blast furnaces to increase output and to improve its ability to cope with the world steel market. It is believed that oxygen injection will allow a decrease in the break-even volume for making steel in a blast furnace.

U.S. steelmakers realized productivity gains through information technology as well as through production techniques. Bethlehem Steel, for instance, entered a 10-year contract with Electronic Data Systems, Inc. (EDS) to coordinate its operations, including data center management, applications development support, and process control activities. The goal of the effort was to fully integrate all aspects of Bethlehem's operations and to allow the company to concentrate on steelmaking rather than information management.

Environmental concerns were a significant issue for the steel industry in the early 2010s. According to Mark Halper in the February 7, 2011, issue of Time magazine, the steel industry was the fifth-largest generator of greenhouse gases, although carbon dioxide (CO2) levels emitted per ton of steel manufactured had declined 45 percent between 1960 and 2007. Nevertheless, some were pushing for use of a new technology, top-gas recycling, which Halper said would, "capture carbon monoxide and carbon dioxide waste gases and reinject the carbon monoxide, coupled with pure oxygen, into the plant's blast furnace." Some claimed this process would reduce both the plant's energy consumption as well as its CO2 emissions. ArcelorMittal, along with ULCOS (a European coalition for ultra-low carbon dioxide steelmaking), had invested $665 million in the Florange, France, steel plant to test the new technology.

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