Us Steel Industry

Capacity utilization is basically used in Macro Economics. It measures how much of the productive potential of the economy is being used at a given point in an economic cycle. Thus, it refers to the relationship between actual output that 'is' produced with the installed equipment and the potential output which 'could' be produced with it, if capacity was fully used. If market demand grows, capacity utilization will rise. If demand weakens, capacity utilization will slacken. Economists and bankers often watch capacity utilization indicators for signs of inflation pressures. Implicitly the capacity utilization rate is also an indicator of how efficiently the factors of production are being used. Capacity utilization falls during a recession because of falling aggregate demand for goods and services. The result is that scarce resources of land, labor and capital are not being used to their full extent.

Rapidly declining steel intensity led to severe overcapacity in the US industry, as it did elsewhere in the developed world. Mills ran at low levels of utilization while the industry gradually closed excess capacity. Between the late 1970s and the early 1990s there was a net reduction of roughly 50 million tons of steel making capacity in the US, a decline of over 30%. This restructuring, while brutal for the industry and its employees, eventually brought supply and demand into better balance. It really is different this time. Steel intensity has stabilized, so steel demand grows slowly along with GDP. This growth, combined with careful investment in new capacity, means that raw steel capability remains below the level required to meet peak steel demand in the US. As a result, the US is a substantial net importer of both finished and semi-finished steel products. This structural undersupply has helped the industry maintain relatively strong operating rates since the late 1980s. In the U.S., weekly steel capacity utilization, which peaked at 75% in June 2010, has...