Steel War

MBA 644 External Environment

Individual written case on

“Steel Wars: A Battle for the Future of American Steel”

Prepared by Norman Wong

Prepared for Dr. John Grether

Date of Submission September 20th, 2010

Problem Statement:

Which policies should USTR consider in order to assist and reduce loss for the US domestic steel industry?

Pertinent Facts:

Present situation of steel market in U.S

* A request of filing section 201 by the United States Trade representative to the International Trade Commission.

* Steel imports spiked in mid 1998 as a result of worldwide overcapacity during the Asian economic crisis according to Exhibit 1.

* Steel employment has been falling steadily since the early 1980s; however, domestic steel shipments have been slowly trending upward

* Both domestic shipments and imports fell in 2001 as a result of sluggish domestic demand during the 2001 recession.

* Imports as a share of total U.S. apparent supply fell from 22.3% in 2000 to 20.2% in 2001

* Import share of new supply has remained fairly stable throughout the 1990s, and actually fell in 2001 relative to recent trend.

* U.S. steel producers point to declines in employment in steel-producing industries as the reason for the need for import protection.

* Firms accounting for 30% of American steel-producing capacity have filed bankruptcy since 1998.

* Combination of falling employment concurrent with increases in output and productivity reflects the structure of the U.S. steel industry.

Integrated mills vs Mini-mills

* Integrated steel mills use the traditional combination of blast furnaces, coke ovens, and oxygen furnaces to produce steel from iron ore, coal, and limestone. And these firms are famous for large, bureaucratic organizations and highly unionized workforce.

* The integrated producers are burdened with ruinous “legacy costs” – the future healthcare and pension benefits steel companies have promised their workforce. Their...