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The domestic steel industry is in a period of transition. The centralized, fully integrated industry is changing to one that is more decentralized, diversified, and competitive. This transition has already been marked by a decline of the large, integrated producers in terms of market share, profitability, and employment. Their place in the market has been taken by smaller, nonintegrated domestic steelmakers and by imports.

The purpose of this paper is to present a general overview of these events and to describe the prospects of the industry over the coming decade. This paper summarizes background research undertaken for the Subcommittee on Oversight and Investigations of the House Energy and Commerce Committee. Its contents include:

• A description of the recent performance of the integrated steel producers;
  
  
• An examination of the factors affecting that performance;
  
  
• A summary of the current federal role in the steel industry; and
  
  
• Projections regarding the performance of the steel industry over the coming decade if current federal policies and industry conditions remain unchanged.

The domestic steel industry includes seven corporations with annual sales in excess of $1.5 billion, and another 30 or so smaller firms. All of the large firms and several of the small firms are known as integrated producers--they are involved in all steps of the steel production process from iron ore and coal to steel plates, coils, bars, or tubes. The rest of the firms, the nonintegrated steelmakers, typically do not refine steel from iron. Rather, their source of raw material is scrap steel, which they melt and reprocess. Some small firms use modern highly productive technologies to fabricate steel into basic products for regional markets. Other firms manufacture specialty steels such as stainless steel, grain-oriented steel, tool steel, and special alloys.

This paper focuses on the large, integrated producers of carbon steel--U.S. Steel, Bethlehem, National, Armco, Inland, LTV, and Republic--because the future of the integrated steel industry is the subject of most of the current policy debate, and is the sector with the most problems. If current federal policies and industry conditions continue, the 1980s are likely to witness a steady, though not dramatic, erosion of the market share, profits, and labor force of the integrated steel firms, which in 1981 provided 72 percent of the nation's supply of steel. By contrast, importers and nonintegrated domestic steelmakers are likely to increase their market share during this transition. Accordingly, increases in employment and investment by nonintegrated producers will, to a degree, compensate for the decline of the integrated sector.

This document is available in its entirety in PDF.