The Steel Industry

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Steel is a brittle grey metal that forms naturally in the earth as iron oxide and contains carbon. It is made by transforming iron ore through two different processes: the blast furnace/basic oxygen route and the electric arc furnace route. Both are being continually improved to reduce emissions and energy use.

The crucible method of making steel was used for centuries before Bessemer invented the Bessemer converter in the mid 1800s, enabling larger railroads, skyscrapers, and ships to be constructed from much stronger and more cost competitive steel. The large steel mills dominated the industry until after World War II. These companies had oligopolistic competition at home, slow technological innovation, and relied on supportive Keynesian policies that kept prices high and wages low to avoid strikes.

After the war, the large American companies lost market share to Third World countries that rebuilt their own steel industries. The aging plants had been built with outdated technology and could not compete with new, more efficient imports from Japan and the West, which had modernized their steel production. Moreover, unionized workers would not accept lower wages to allow for plant restructuring and layoffs.

In the late 1990s, these older plants began to fail due to high wages and healthcare/pension costs. They also faced pressure from smaller, nonunion mills using German innovations in electric arc furnace technology to make steel from recycled scrap rather than the traditional blast furnace approach. This allowed the mini-mills to operate more cheaply and at a greater scale, while retaining their unionized workforce.