Domestic iron ore and steel industriescan survive, but they are running out of time

Introduction US steel production dropped 5% in 1985 to 79 Mt (87 million st). US operators are producing at only about 65% of capacity. More than 600 steelmaking facilities have closed in just 10 years. And McDonalds Corp. now employs more people than the entire US steel industry's 200,000. Not gloomy enough? Well, the North American iron ore industry can expect more plant closures and capacity reductions in the coming years. And don't count on the Federal government's voluntary restraint agreements with foreign steel producers to bail out the industry. In 1985, the first full year of the restraint agreements program, steel imports were more than 25% of domestic consumption, well above the 18.5% target. That's the grim truth, according to M. A. Hanna's Robert F. Anderson. Hanna's chairman was speaking to a group of iron ore, taconite, and steel industry executives at the Minnesota Section AIME meeting in Duluth in January. Despite those depressing facts, Anderson said he believes the domestic iron ore and steel industries can survive, although they will both be shadows of their former selves. But, he is giving them five years to make the necessary adjustments or both will die. Major steel producers during the last four years have added about $7 billion in losses to their books, he said. In Minnesota's Iron Range, employment in iron ore and taconite has gone from 14,000 10 years ago to less than half that today. Anderson explained that steel producers have more capacity today that more than meets their demand for iron ore. This places great pressure on iron ore producers to restructure to survive. Hanna, for example, has been forced to close or divest its iron ore interests in Missouri, Michigan, Canada, and Minnesota since 1980. The latest casualty was the company's Butler taconite project in Minnesota. "In just five years we've reduced ownership of active pellet capacity by 80%," he said. Technological ironies Improved technology is one cause of the industry's woes, Anderson said. While these improvements are welcome in terms of remaining competitive, the irony is that some of these technological improvements are coming at the expense of the iron and steel industries. There is a growing demand for lighter and less expensive substitutes for steel. Automobiles contain about 318 kg (700 lbs) less steel than they did 10 years ago. And, Anderson said Ford Motor Co. has indicated it plans to reduce steel usage an average of 50 kg (112 lbs) per car in the next few years. One leading steel analyst has predicted that steel usage in cars will fall another 40% in the coming years. Improved steelmaking technology has also decreased raw steel production. Continuous casting is more efficient than traditional forms of steelmaking, Anderson said. Continuous casting accounted for about 43% of steel production in the US last year, compared to 9% a decade earlier. And, Japan and Korea are producing more