Trump is wrong to make steel a symbol of American decay. It’s producing the same as ever

by Rashmee

Posted on August 11, 2016



america i sing you backDonald Trump continues to talk about steel – and how it will literally and metaphorically put metal/mettle into the American spine once again.

But it may be profoundly unwise to make steel a symbol of the economic growth that Mr Trump promises with an isolationist “America First” policy.

The US steel industry is doing rather well – production is at the same level it’s been for decades (90m – 120m tonnes per year) even though it accounts for fewer jobs because of efficiency gains.

As veteran economics commentator Robert J Samuelson recently pointed out in The Wasington Post: “True, dozens of steel plants have closed. But dozens of more efficient plants have opened. Productivity (a.k.a., efficiency) has increased dramatically.”

This is on account of the rise of mini-mills, as they are called, which use scrap steel as raw material and have a cost advantage over older mills.

Mr Samuelson quotes the industry group, the American Iron and Steel Institute: From 1970 to 2015, mini mills’ share of US steel production went from 15 per cent to 63 per cent. In a recent study, economists Allan Collard-Wexler of Duke University and Jan De Loecker of Princeton University said the jobs loss was because of the greater efficiency of mini mills. “If there were no foreign trade in steel, most of those jobs would have vanished anyway. The least efficient vertically integrated plants were forced to close. The decisive competition has been domestic, not foreign,” writes Mr Samuelson.

That said, there is a global steel glut mainly because China has accounted for 78 per cent of the rise in steelmaking capacity since 2005, according to analyst Lucy Lu of the Peterson Institute.

The answer to that is not a return to old-fashioned steel mills in America. Instead, it is the slow grind of working towards a global agreement to manage excess capacity. And it is to prepare for the upskilling of American workers and their move towards different capabilities.

Just consider the entrepreneurial imagination demonstrated by Austrian steel producer Voestalpine even at a time of falling global prices. Earlier this year, it announced that it would build a new steel mill that would not produce commoditised steel but specialist formulations instead, such as those used in cars or electronics.

 


Rashmee has lived and worked in several countries in the past decade, including Afghanistan, India, Haiti, Tunisia, the UAE, US and UK

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