Current Status of Supply and Use of Iron, Steel, and Ferroalloys

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  • This article was downloaded by: [The University of Manchester Library]On: 19 December 2014, At: 07:30Publisher: Taylor & FrancisInforma Ltd Registered in England and Wales Registered Number: 1072954 Registered office: Mortimer House,37-41 Mortimer Street, London W1T 3JH, UK

    Mineral Processing and Extractive Metallurgy Review:An International JournalPublication details, including instructions for authors and subscription information:http://www.tandfonline.com/loi/gmpr20

    Current Status of Supply and Use of Iron, Steel, andFerroalloysFREDERICK J. SCHOTTMAN aa Division of Ferrous Metals , U.S. Bureau of Mines , 2401 E Street, NW, Washington, D.C,20241Published online: 10 Jun 2010.

    To cite this article: FREDERICK J. SCHOTTMAN (1988) Current Status of Supply and Use of Iron, Steel, and Ferroalloys, MineralProcessing and Extractive Metallurgy Review: An International Journal, 3:1-4, 45-54, DOI: 10.1080/08827508808952614

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  • Mineral Processing and Extractive Metallurgy Review. 1988, Vol. 3. pp. 45-54Photocopying permitted by license only 1988 Gordon and Breach. Science Publishers lnc.Printed in Great Britain

    Current Status of Supplyand Use of Iron, Steel,and Ferroalloys

    FREDERICK J. SCHOTTMAN

    Division of Ferrous Metals, U.S. Bureau of Mines, 2401 E Street, NW.Washington, D.C. 20241

    After. nearly 30-yeor period of expansion after World War II, the iron and steelindustries in the older industrialized countries have suffered from overcapacity since1974. The overcapacity was caused by on unexpected change in the growth of demandfor most materials following the rapid increase in petroleum prices. Capacity has heenreduced by the major industrialized countries. New capacity continues to be installedin developing countries to produce steel for growing demand in those countries and forexport to the industrialized world. The bulk fcrroalloys industry in the major steelproducing countries has also declined because of overcapacity and because ofcompetition from new capacity in countries with local ore or low cost electric power.Although most iron and steel companies ore still financially unhealthy, their conditionis likely to improve as better balance is restored between supply and demand.

    Iron and steel make up about nine-tenths of the metal consumed in the UnitedStates. Tbis poper is primarily concerned with the steel industry that produces rolledand forged steel products. Problems such as decreased demand, substitution. andimport competition have also affected the foundry industry that produces iron andsteel castings. The ferroalloy metals are those that have major consumption inproducing iron and steel. In most cases, they also have otber important applications,

    All of the metals discussed here have been in more or less continuous oversupplysince about 1974. The primary reason has been a much slower growth rate in demand,Many older producers of the metoIs have also been hurt by new competitors. Twogeneral trends can be noted, One is the increased intemutionalization of markets. Thischange is particularly important for steel, which is a more or less finished product.lrnproved communication, in the sense both of movement of information and ofmovement of goods, has made it more practical to acquire goods such as steel fromdistant suppliers. Also, various barriers such as tariffs arc generally lower today, Asecond trend is the movement of metal producing industries from the olderindustrialized countries to the less developed countries.

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  • 46

    BACKGROUND

    FREDERICK J. SCHOn'MAN

    Between the end of World War II and the early 1970's there wasrapid, relatively steady growth in the iron and steel industries.Production of steel in the market economy countries increased bya factor of five between 1946 and 1974, with only short-term down-turns. The United States emerged from World War II with an intact,and enlarged, steel industry. In the postwar period, the steelindustries of Japan and Western Europe were rebuilt and greatlyexpanded. By 1974, they were comparable in size to the industry ofthe United states and, on the whole, were more modern because oftheir more recent expansion.

    Exports were important markets for the modern steel industriesof Japan and Europe. Developing countries, which lacked sufficientproduction capacity of their own, absorbed much of these exports.Although the United States was a major exporter of steel in theimmediate postwar period, imports of steel from Japan and Europebecame a matter of concern to the domestic industry in the late1960's.

    In early 1974, which can now be seen as the last truly good yearfor the western world steel industry, demand was strong and theindustry was producing near its effective capacity of 500 millionmetric tons per year. Shortages were feared and prices were high, soexpansion projects were started or planned. Although the generaltrend of steel demand was downward after 1974, production capacitydid not peak in Japan and the United States until 1977, and in theEuropean Economic Community (EEC) not until 1980. However,continuing weak demand and financial losses forces reductions incapacity. By 1986, capacities in the EEC and the United States hadbeen reduced by about one-sixth and that of Japan by about one-tenth. Meanwhile, however, demand and production capacity con-tinued to increase in the developing countries.

    DEMAND

    After 1974, Western World steel demand stagnated. In very largepart, the demand weakness can be traced to the direct and indirecteffects of the jump in oil prices in the early 1970's.

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  • SUPPLY AND USE OF IRON AND STEEL 47

    Besides the direct effects of draining off income from non-oilactivities to the oil producers, the oil price increases worsened in-flation and thereby led to policies that dampened economic growthin order to restrain inflation. In addition, much of the internationaldebt problem of some developing countries is related to inflation, andassociated high interest rates, and to the weakened demand for goodscaused by the economic problems of the industrialized countries.

    The oil crisis also contributed to changes in how materials areutilized. Higher prices led directly to demand for more energyefficiency. In the case of automobiles, this meant smaller automobilescontaining less steel.

    The oil crisis also offered evidence for the idea that resourcedepletion was threatening the world. This and related ideas wereinvolved in attitudinal changes that tended to reduce materialsconsumption. There was a weakening of the belief in bigness itself asa virtue. In industry, there was stronger emphasis by managementand engineering on efficient designs and on minimizing the consump-tion of materials.

    Other factors not related to oil prices also tended to affect steeldemand. These include the general trend toward services as a largerpart of the economy, substitution of other materials for steel, and,in the United States at least, a trend to import a larger share ofsteel-intensive manufactured goods. Overall, although some of thechanges resulting from higher oil prices may be reversed if the currentlower prices hold, steel demand will probably not grow as rapidly asthe economy.

    CURRENT STATUS OF THE INDUSTRY

    The steel industry can be divided into three sectors. The integratedmills start with iron ore and other raw materials and process themthrough to finished products. Minimills remelt scrap iron and steel tomake finished products. Specialty steel mills also usually remelt scrapas their raw material but produce certain high-quality, high-valueproducts such as stainless steels and tool steels. Steel companies maybe involved in more than one sector.

    In the United States, the integrated steel companies have sufferedthe most damage sinc