This industry covers establishments primarily engaged in cold-rolling steel sheets and strip from purchased hot-rolled sheets; cold-drawing steel bars and steel shapes from purchased hot-rolled steel bars; and producing other cold finished steel. Establishments primarily engaged in the production of steel, including hotrolled steel sheets that are then cold-rolled are classified in SIC 3312: Blast Furnaces and Steel Mills.
331221 (Cold-Rolled Steel Shape Manufacturing)
The demand for cold finished steel comes primarily from the automotive, aerospace, construction, housing, and home appliance industries.
Price increases dominated the news in the late 1990s for this industry. The price of the source, sheet steel slabs, peaked in early 1998 at $265 per ton, then plummeted to $150 by the end of 1998, and spent 1999 climbing back up to the $200 mark, with optimistic projections calling for a price of $250 per ton by early 2000. Accordingly, industry producers steadily increased the prices they charged for the end products, hot- and cold-rolled sheets and coated sheets. Industry producers attributed the hikes to the tight market. And industry analysts further elaborated by pointing out that strong demand, continued low inventories, and increasing backlogs led to reduced imports, as European shortfalls started eating up excess stocks of Asian steel.
The value of industry shipments fluctuated as well during the late 1990s, plunging from $6.26 billion in 1998 to $4.79 billion in 1999, before rebounding to $5.09 billion in 2000. Industry employment in 2000 totaled 12,852 workers, compared to 14,319 workers in 1998.
Cold-rolling is the process of rolling steel without first reheating it. This method produces a smooth steel surface that reduces thickness and enhances machinability. Cold-rolling gives steel the ability to be stretched and shaped without cracking and provides it with a bright finish. The three main product classes within the industry are steel sheet, steel strip, and steel bars.
Steel sheet and strip are both flat products that are generally less than ¼ inch thick. Sheet is the wider of the two by 12 inches or more and is produced to less exact thickness than the strip. Steelmakers produce most sheet and strip in the form of large coils that the user can cut into pieces of any desired length. Much of the sheet and strip manufactured is used in automobile bodies, but thousands of other products also contain these forms of steel.
Steel companies make bars in many sizes and various shapes, including squares, circles, ovals, hexagons, and rectangles. Products made from steel bars include many precision-engineered components that power automobiles, trucks, tractors, hand tools, washing machines, and lawn mowers.
There were 187 establishments producing cold steel products in 1997, down from 219 in 1993. The largest concentration of firms by shipment value could be found in the Great Lakes region of the United States. The northeast and West Coast were second and third, respectively. The largest producing states in descending order of shipments were Ohio, Pennsylvania, Illinois, Michigan, Indiana, Connecticut, and New York.
The production of cold finished steel became industrialized early in the twentieth century, prompted by the mass marketing of automobiles, household appliances, and industrial machinery. New and more efficient steel production methods ensued at a rapid pace.
During World War II, the American steel industry boomed, while other countries' steel manufacturing facilities sustained considerable damage. American firms dominated global steel markets during the post-war years, and, by 1960, American shipments of cold finished steel shapes totaled 17 million tons, rising to 20 million tons by the middle of the decade. During this time, however, Japan and several European countries focused on rebuilding their steel industries, using the most modern facilities and equipment available, while American steelmakers continued to use older, less efficient equipment. Consequently, American shipments fell below 17 million tons in 1970.
Worldwide inflation and high interest rates in the early 1970s curtailed foreign steel production, particularly in developing nations, allowing U.S. shipments to realize significant gains. In 1973, U.S. shipments stood at 24.09 million tons, the highest level experienced by the industry in over two decades. Economic recession in the United States, however, eventually pushed shipments back down to 20.76 million tons in 1979.
The cold finished steel industry faced intense foreign competition during the 1980s. Due to the high value of the dollar, foreign steel became significantly less expensive than American steel. Furthermore, having rebuilt and improved their facilities, foreign producers were marketing a superior product, and this quality gap widened significantly during the decade. Consequently, American companies operating with outdated equipment and production methods were often priced out of the market. From 1979 to 1980, U.S. shipments of cold finished steel dropped 24 percent. The industry recovered slightly in 1981, with shipments rising 8 percent; the following year, however, shipments fell 25 percent to a 30-year low.
Hoping to become more competitive by realizing productivity gains, some American companies began installing completely automated, high-speed production equipment with computer-controlled systems. In 1988, industry shipments were valued at $6.3 billion, representing a small increase over previous years. The Gulf War and the early 1990s economic recession, however, depressed the value of shipments to a low of $5.4 billion in 1991. By 1995, the industry increased production as world steel demand surged to levels higher than those before the Gulf War. In 1995, shipments of cold finished products stood at more than $7 billion.
Many analysts doubted that cold finished steel makers would again reach the shipment levels enjoyed during the 1960s and 1970s. Steel sheet and bar shipments had apparently peaked in 1973 at 20.38 and 2.25 million tons each, while steel strip shipments peaked earlier, at 1.58 million tons in 1966.
Nevertheless, the industry regarded the 1990s with optimism. As the industry gradually shed its excess capacity, its ability to raise prices in the face of increasing demand was expected to help buoy profits. Steelmakers also relied on investments in new technologies and commitments to reducing costs to increase their chances for survival and long-term profitability.
While prices did rise somewhat throughout 1996, worldwide steel capacity surged as foreign production, particularly from China and Russia, began to swell market reserves. The influx of foreign steel on the market diminished domestic producers' ability to pass on increasing cost to consumers. Some industry leaders, like Worthington Industries and LTV Corporation, sought to expand their operations to produce economies of scale and to diversify into more value-added steel products. The growth of nonunion steel mill competitors forced older members of the industry to seek additional cost-containment strategies to sustain profit margins.
The value of cold-finished steel shipments rose substantially in 1995 and was projected to make similar rises throughout the rest of the decade. As consumers pushed for cost reductions from all parts suppliers, however, some steel bar manufacturers were expected to have difficulty passing along their rising costs. Steel sheet price was 5 percent higher in 1996 than 1995, but remained well below 1994 levels. Imports were the major factor in keeping prices down.
As the industry entered the mid-1990s, its success hinged on its ability to meet the needs of domestic durable goods customers in a climate of rising competition, business costs, labor difficulties, and alternative uses of new metals and plastics. The industry was therefore called upon to improve quality, technology, and productivity while working in partnership with their customers to enhance their prospects for long-term survival.
On January 30, 1998, several companies simultaneously announced their price increases for finished sheet steel. Middletown, Ohio-based AK Steel Corp., Bethlehem, Pennsylvania-based Bethlehem Steel Corp., and Mishawaka, Indiana-based National Steel Corp. raised their prices for hot-rolled sheet by $10 per ton from $310, for cold-rolled sheet by $15 per ton from $460, and for coated sheet by $20 per ton from $520. Price hiking continued throughout 1999, starting with increases in February 1999 by Allegheny Ludlum, Armco, and J&L Specialty, raising the price 4 percent above 1998 lows. Allegheny initiated another price increase of 7 percent on stainless hot- and cold-rolled strip, sheet, and continuous mill plate as of July 19, 1999. Armco followed on Allegheny's heels with the same hike, effective August 1, 1999.
Then, on August 5, 1999, Cleveland, Ohio-based LTV Steel Company Inc. effectively raised its prices by lowering its competitive discounts by $30 per ton of flat-rolled steel (hot- and cold-rolled as well as coated) as of October 3, 1999; other companies, such as Chicago-based Ispat-Inland Steel Co., Pittsburgh-based US Steel Group of USX Corp., Wheeling, West Virginia-based Wheeling-Pittsburgh Steel Corp., Weirton, West Virginia-based Weirton Steel Corp., National Steel, and Bethlehem Steel, followed suit. National then raised its hot-rolled sheet prices by $25 per ton, its prices for cold-rolled sheet, as well as hot-dip galvanized and electrogalvanized by $20 per ton on January 2, 2000.
The value of industry shipments varied considerably during the late 1990s. After increasing to $6.26 billion in 1998, the value of shipments dropped precipitously to $4.79 billion in 1999. The following year, however, shipments increased to $5.09 billion. The cost of materials fell from $4.32 billion in 1998 to $3.28 billion in 1999 and then increased slightly in 2000 to $3.46 billion.
LTV Steel Company of Cleveland, Ohio led the industry with 1997 sales of $4.4 billion, according to the most recent available data from Infotrac. National Steel Corp. followed with $2.8 billion in 1998 sales. Ispat International took over Inland Steel Co. on July 16, 1998, to form the Ispat-Inland Steel Co. For the first six months of 1998 before the takeover, Inland generated sales of $1.23 billion, slipping slightly from sales of $1.25 billion for the same six months of 1997. AK Steel Corp. posted sales of $2.4 billion in 1998, and Armco Inc. garnered $1.7 billion in 1998 sales. For its fiscal year ended May 31, 1998, Columbus, Ohio-based Worthington Industries Inc. reported sales of $1.6 billion.
In the early 1990s, attrition and early retirement incentives were used more often than layoffs to cut back on labor costs. Flexible assignment of employees helped reduce the number of classes of skilled steel trades. Approximately 12,852 employees served the industry in 2000, compared to 15,100 in 1994.
Average production wages per hour totaled $20.25 in 2000, roughly the same as wages in 1997. Payroll costs were $593 million in 2000. Nearly all non-management employees belong to the United Steelworkers of America (USWA), one of the largest labor unions in the United States. WHX Corp., the third largest company in the sector, experienced substantial labor problems in 1996. The USWA walked out of talks with the company over the issue of pensions. Work ceased at eight of the companies' facilities, even though both sides engaged a federal mediator to resolve the dispute.
In the early 1990s, the U.S. steel industry filed charges of unfair competition against several foreign firms. Upon review, the U.S. International Trade Commission (ITC) found that 25 of the claims were justified and assessed duties accordingly. Due to the increased potential for duties imposed by the ITC on their steel, many foreign steelmakers reduced their exports to the United States in 1993.
Some domestic manufacturers filed complaints with the International Trade Commission protesting the imports of plate steel from China, Russia, South Africa, and Ukraine. Domestic imports from those countries increased four-fold between 1993 and 1995 and were expected to surpass 1 million tons in 1996.
The 1993 passage of the North American Free Trade Agreement (NAFTA) was implemented to help eliminate tariffs placed on foreign steel entering America. Mexico, Canada, and the United States were scheduled to drop all tariffs on cold finished steel traded among the three countries before the year 2004. As of 1993, the tariff on steel sheet, strip, and bar exported by Mexico was 10 percent. Canada's tariffs on sheet and strip were between 6.8 and 10.2 percent, and on bar between zero and 12.5 percent. The U.S. tariffs on sheet and strip were between 2.4 and 6 percent, and on bar between 3.3 and 10.6 percent.
In the early 1990s, the industry was concerned with improving the quality and reputation of steel in the face of aggressive marketing techniques by makers of alternative metals. Manufacturers that purchased steel bar typically looked to obtain straight components, tight tolerances, fast machining rates, and quality surfaces—characteristics that could be furnished by alternative materials such as plastics, aluminum, and brass. The low density of aluminum, for example, was found to lengthen tool life and productivity in machining operations as well as to produce a lighter weight, and thereby more fuel efficient, automobiles. Moreover, steep declines in brass and aluminum prices made those materials more attractive to manufacturers.
In order to compete for market share, the steel industry sought a better understanding of the product's end use and to communicate to customers the advantages of steel. By becoming a part of their customers' product problem-solving and supplier development teams, steel firms hoped to win back lost markets and combat the substitution of alternative metals for their cold-finished steel.
"Allegheny Ludlum, Armco, and J&L Specialty Steel are raisingselling prices." Purchasing, 11 February 1999.
"Armco tries for stainless hike." American Metal Market, 29 July 1999.
Haflich, Frank. "Steel slabs reviving from slump." American Metal Market, 24 August 1999.
Infotrac Company Profiles. Available from http://web6.infotrac.galegroup.com (visited 1/7/00).
"Inland Steel sales, earnings slide." American Metal Market, 23 July 1998.
"LTV hiking flat-rolled steel." American Metal Market, 5 August 1999.
Marcus, Peter F. "Metal Tags Encounter Fork in the Road." Purchasing, 16 January 1997. Available from http://www.manufacturing.net/magazine/purchasing/archives/1997/pur0101.97/011mnnews.htm#ME .
"National to increase sheet." American Metal Market, 18 October 1999.
Robertson, Scott. "Sheet steel price hikes planned." American Metal Market, 30 January 1998.
Stundza, Tom, "Supply Overwhelms a Weakening Market." Purchasing, 13 February 1997. Available from http://www.manufacturing.net/magazine/purchasing/archives/1997/pur0213.97/021bars.htm .
——. "On-Time Means a Lot to Steel Buyers." Purchasing, 3 April 1997. Available from http://www.manufacturing.net/magazine/purchasing/archives/1997/pur0403.97/041steel.htm .
United States Census Bureau. "Statistics for Industries and Industry Groups: 2000." Annual Survey of Manufacturers. February 2002. Available from http://www.census.gov .