The US steel industry has existed since the 19th century and consolidated in the early 20th century with the formation of large companies. Protectionist policies were implemented during the 1930s and 1940s, including price fixing and tariffs. The industry transitioned from open hearth furnaces to more efficient basic oxygen and electric arc furnaces. In the late 20th century, the industry faced increased global competition and overcapacity. In the early 2000s, the US government imposed section 201 tariffs on steel imports to protect domestic producers, but this was ruled to violate international trade rules by the WTO. The tariffs were eventually lifted to avoid a trade war, despite domestic criticism. The US steel industry continues to face challenges from rising

1. Submitted By:-
Aman Sawhney
Alika Koshy
Ribhu Vashishtha
Sanchita Kapoor

2. •US Steel Industry existing since 19th
century.
•Greater stability to production and prices led
to the consolidation of steel industry (between
1898 - 1900) and led to the formation of few
large companies.
•Inefficiency of large companies led to
formation of “The US Steel Corporation.

3. •Order to dissolve US Steel Corporation which was
later taken back.
•Great Depression of 1930’s leading to breakdown of
structure of uniform delivered prices.
•Price Fixing Made legal(under NIRA- 1934).
•US enters World War II (1939 – 1945).

4.  1. Before World War 2, Open Hearth Furnaces (OHF)
were in use.
It took Several hours to produce the steel through OHF.
 2. After World war 2, Basic Oxygen furnace (BOF)
were in use.
BOF use to complete the job in 45 minutes.
Used by Integrated Steel mills
 3. After BOF, Electric Arc Furnaces ( EAF)
Mini Mills use EAF Method.
15-09-2014 4

5. Oligopolistic to Globally Competitive from 1960 to 1990
Earlier 4 players then increased to many
Cheap Import from many countries
Domestic competition
Overcapacity in Foreign countries
Financial Crisis in South East Asia and Russia results in
dumping the Steel in US
15-09-2014 5

6.  Started in early 2000s with an objective to achieve
economies of scale
 31% capacity shifted from small firms to large firms
 Achieved cost savings rather than economies of scale
15-09-2014 6

7. US President George W Bush in 2001 announced the
Steel Program which consisted of 3 parts:
1. Eliminating Inefficient Excess Capacity
I. Excess capacity one of the main reason for crisis in
the industry
II. Review of steel capacity worldwide
III. Plant closures and ‘capacity closure fund’
15-09-2014 7

8. 2. Eliminating Market Distorting Practices
1. eliminate subsidy and govt. involvement in steel
sector
II. agreement to eliminate trade-distorting practices
3. Section 201 Tariff Measures
I. investigation under USITC and it’s
recommendations
II. Tariffs ranging from 8 to 30 % on imported steel
products for 3 years
III. Anti-surge mechanism and import licensing system
IV. Tariffs to be removed if domestic industry does not
improve its competitiveness 15-09-2014 8

9.  PROTECTIONISM
i. Tariff Measures.
ii. Safeguard the interest of the Steel producers in US.
iii. Legacy Cost’s.
iv. Because of Protection the Industry was able to regain its
leadership position in quality and productivity and in 1991
experienced highest level of exports since 1970.
v. Unfair trade practices were being restricted like dumping
(during financial crises in South East Asia and Russia)
15-09-2014 9

10.  FREE TRADE
i. Overproduction (Due to Subsidies) and Demand.
ii. After the imposition of Section 201 , the steel
industry was still struggling because foreign govt.
were also subsidizing there steel industries.
iii. Before the govt. intervention in the matter in 1960’s ,
the average compensation in the industry was
almost equal to the avg. compensation in other
manufacturing sector.
15-09-2014 10

11.  FREE TRADE (Cont….)
iv. In 2000s , the average compensation was more
than 50% higher than that in the
manufacturing sector because the steel
industry was highly unionized and strong
trade unions without any threat of foreign
competition could negotiate for higher
packages.
v. Due to technology advancement mini-mills
with there effective production techniques
increased competition.
vi. Section 201 forces user to pay more.
15-09-2014 11

12. •GLOBALISATION
•HEALTHY COMPETITION
•LESSER COST
As Herman Daly has rightly said “Under the new global
economy, capital tends simply to flow to wherever costs
are lowest—that is, to pursue absolute advantage”

13. Imposition Of Section 201 Tariff Measures by
“The President” - United States
1. Fierce Opposition by Major Trading Partners*
and the matter was raised with WTO.
2. In July 2003, WTO gave its ruling that Section
201 Tariff measures violated “International Trade
Rules”.
3. As a result, the opposition** now could impose
“Retaliatory Duties” on imports from US.
4. In Aug, 2003 US govt. appealed to WTO
Appellate Body.
5. In Nov 2003, WTO gave its “definitive” ruling
and held their stance as in July 2003.

14. After the “Definitive” ruling US President had few options in
hand.
1. Drop Tariffs .. (Domestic Steel Industry will turn hostile)
2. Defy WTO .. (Retaliation from EU)
3. To find a mid-way* to pacify-a)
Domestic Steel Industry
b) Foreign Steel exporters
15-09-2014 14

15. 1. The implementation of section 201 tariffs were
defended as –
a. To revive steel industry.
b. To protect the workers* and communities
dependent on steel industry for their livelihood.
2. In Dec 2003 The President lifted the Tariff, thus
avoiding a Trade War with EU.
3. The decision was met with wide domestic criticism.
15-09-2014 15

16. 1. The US Steel industry faces considerable domestic
and international challenges.
2. Raw material cost is increasing and US trade laws
continue to be under “Global Attack”.
3. To remain competitive, the industry will have to
invest in new facilities and technologies.
4. The challenge before the industry is to attract
capital which seems difficult because the industry
is experiencing –
I. Low Rates of profit
II. Bankruptcy
III. High Costs
IV. Global overcapacity
V. Slowly growing product market
15-09-2014 16

17. Though it is difficult to predict the future course of US
Steel Industry, but it seems,
 Employment in the industry is likely to fall in US.
 The importance of US Steel in the US economy will
further decline.
15-09-2014 17

18. 15-09-2014 18