Excess in Global Steel Industry

Topics: Free trade, Steel, Tariff Pages: 15 (4686 words) Published: August 24, 2010

1. Table 3.1. 3

2. Figure 3.2 6

3. Question 2
What are the reasons for persistent excess capacity in the global steel industry? What would it take for this capacity to be eradicated?

4. Question 2 6
Do you think that the steel industry is vital to the national security Interest of the United State? If so, is it important to protect this industry from low cost foreign producers?

5. Question 3 9
Do you think it is correct to assert, as advocates of free trade do, that Protectionism is self-defeating and harms consumers?

6. Question 4 12
What do you think would happen to American steel makers if the U.S Government were to unilaterally remove all barriers to foreign steel imports? Would the steel industry in the United States become extinct?

7. Question 5 14
What do you think President Bush should do in this case? Why?

8. Reference 17

Question 1

What are the reasons for persistent excess capacity in the global steel industry? What would it take for this capacity to be eradicated?

The basic reason for global steel industry has been persistent with excess capacity is because of supply has exceeded demand. There are many reasons contributing towards the excess in supply. The extensive use of metal in industry started during the early 20th centuries when the world is going through the industrial revolution. The introduction of machinery in almost all the industries promotes the use of steel. Then come the World War where the used of steel is at its maximum when almost all the machines and weapons used in the war are made with one or more combination of steel. In view of the high use of steel, the demand of steel worldwide is increased and many new companies emerge to capitalized with the high demand.

Until after the Second World War, the major world producers of steel were Western Europe and United State of America (USA). However, between 1980s and 1990s other major producing nations which include China, Japan, Russia, Germany, South Korea, Ukraine, and Brazil has emerge in response to the high demand and contributes to the word supply. In 1999, some 40 percent of all steel produced was traded internationally, increase from 26 percent in 1990. The United State of America now is no longer the major world producers of steel instead the USA has become the word largest importer of steel. In 1999, the world largest steel producer company is Nippon Steel of Japan with production of 28.4 million metric tan and the second largest is POSCO of South Korea, producing 27.7 million metric ton. The statistic on world export and import of steel for 1999 is as per Table 3.1 ( W.L Hill, 2003).

|Table 3.1. |Exports and Imports of Steel, 1999 (million of metric tons) |

| |Country |Exports | |Country |Imports | |2 |Japan |26.1 |2 |Germany |17.7 | |3 |Germany |20.9 |3 |China |17.0 | |4 |Belgium-Luxembourg |20.7 |4 |Italy |15.9 | |5 |Ukraine |19.0 |5 |France |15.3 | |6 |France |16.2 |6 |Taiwan |13.1 |

Source : Charles W.L. Hill (2003), International Business, Competing in the Global Marketplace, International Edition, Fourth Edition.

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