What are the most important challenges facing leading players in the global steel industry today
Competition comes from local and international companies, and some of the fiercest competitors arise from cheap imports of steel. For instance, European and Japanese steel arrived in the United States (U.S.) in the 1950s, wherein the latter experienced pricing competition for high-priced stainless and specialty steel. Because of previous practices of oligarchy, American steelmakers, nonetheless, also made themselves less competitive already. The oligarchy affected the pricing system by making price a product of collusion, instead of being dictated by costs and market demand. During this time, American steelmakers complained of the dumping done by steel imports. American steelmakers also charged that foreign subsidies allowed imports to drastically lower their prices and which skewed the competition. A recession occurred also during this time, which made the profit-maximizing output lesser than the output that minimizes average cost. The raw materials also for steel continued to spike, thereby increasing average cost and prices in the long run. Since the steel market became somewhat elastic because of lower prices from imports, many customers transferred to the competition.
Competition, however, is not merely about foreign players, but it also involves brand management and efficiency. American company Nucor, for instance, broke traditional steel production by shifting from blast furnace strategy to minimills and using scrap metal for its raw materials. Nucor invented the mini mill, which refers to smaller-scale steel production plants that are strategically located near clients and use scrap metal production. Because of the production system and location, Nucor decreased their operational costs and provided lower-priced products. McQuiston also talks about brand management as an effective way of fighting competition. He made a case study on RAEX LASER Steel and how its marketing positioned the product as a total solution to shops and other clients. This marketing strategy is merged with customer relations support, which greatly improved revenues in the long-run. Its customers did see the product as more than a commodity, but an experience of total customer satisfaction. Hence, marketing issues and production efficiency improvements also affected domestic competition.
Environmental concerns also push steelmakers to improve production practices and technology. Kim and Worrell noted that during the1992 Earth Summit in Rio de Janeiro, more than 150 countries signed the United Nations Framework Convention on Climate Change (FCCC), which targeted lesser carbon dioxide emissions in order to stabilize greenhouse gas concentrations. Because of this move, there are calls for steel companies to produce steel with minimal ecological footprint. Steel companies are charged for not paying their externalities, such as pollution, which greatly affects not only local communities, but contributes to the global climate changes happening in the world. Environmental protection, however, is not a cheap option for steel companies, and they have yet to improve their technology, so that they can drastically lessen carbon dioxide emissions.
The global steel industry is facing global challenges that are not easy to respond to. More than ever, they face the challenges of being environmental stewards, while balancing the interests of a wide range of stakeholders.