James Pethokoukis is entirely correct to note that it wasn’t imports which shafted the larger and older part of America’s steel industry. Technological change which the old integrated plants didn’t really see creeping up on them did. But that still doesn’t excuse the brazen chutzpah with which Dan DiMicco, ex- of Nucor, approaches this issue.
Which brings us to President Trump’s proposed steel and aluminum tariffs. Again, some observers say markets have failed because of bad behavior by some participants, in this case overseas producers. So government must act. But is that really what happened to Big Steel in the US? Or were fat and happy incumbent slow to recognize a challenge?
Well, yes, dinosaur incumbents tend to be like that. As at Bloomberg:
Instead, the industry was lapped by foreign producers — and unfair trade practices were simply not a factor. Instead, the blame lies with U.S. manufacturers who held onto the so-called “open hearth” method of steel production decades after its expiration date.
Europeans, though, had no such attachment to the past, perhaps because many factories had been destroyed in the war. Moreover, they had started experimenting with the idea of turning iron into steel by blasting pure oxygen onto the molten metal. This method, which became known as the basic-oxygen process, first entered trial use in 1948 at a factory in Linz, Austria, owned by the small steel firm VOEST. The company soon built a full-scale commercial facility that went online in 1952.
Well, yes, that’s part of it. But not the major part. In the NYT there’s this:
Before Nafta was even a gleam in a trade negotiator’s eye, Pittsburgh had already lost the biggest chunk of its steelworking jobs. The culprit in that era was both international competition and the introduction of mini-mills, which allowed the production of steel with far fewer man-hours.
In the American context mini-mills have been much more important. Which is where we come to DiMicco.
Former Nucor CEO: Tariffs completely justified
And, well, no, not really. As I discussed elsewhere some time ago:
I’ve been guilty of more than my fair share of brazen chutzpah over the years but this sally into the form from Dan DiMicco still has the ability to take even my breath away. For DiMicco was the CEO of Nucor and he’s calling for trade protection for the American steel industry. That American steel industry which has suffered so grievously from the competition from Nucor. That Nucor which Dan DiMicco used to be the CEO of. That American steel industry which has suffered more from the competition of Dan DiMicco’s Nucor than it has from anything the Chinese have done.
To recap – it’s technological change which crippled the traditional US steel sector. Not just open hearth but even sticking with blast furnaces themselves. It’s much more efficient to be making steel out of scrap using mini-mills. Exactly and precisely what Nucor has done over the decades. They’re very, very good at it too. But it really is exactly that competition from Nucor that has been closing those older integrated and vast steel plants, not anything the Europeans or Chinese have done.
That’s just what has been happening. Technological change, not trade change nor China. And here’s the kicker. Nucor isn’t the only minimill operator but it’s one of the largest in the world. And it pioneered both the basic idea and many of the refinements to the technology over these past decades. It’s a useful shorthand to say that, even if it’s not accurate it’s shorthand, Nucor killed off those blast furnace parts of the American steel industry. And now we’ve got the ex-CEO of Nucor arguing that the American steel industry needs trade protection?
That’s industrial grade brazen chutzpah right there. The people that cut a swathe through an American industry demand trade protection for that industry they cut a swathe through? Almost admirable in its effrontery really.
Or as Mr. DiMicco would probably prefer we didn’t put it. Dan DiMicco and Nucor used advancing technology to kill off large parts of the US steel industry. Good for them of course. They’re now using that death they caused as proof that their, Nucor’s, production must be protected from competition. The correct answer is to tell them to go boil their heads. We’ll even lend ’em a pot to do it in if none of their furnaces are still lit.