NCPA - National Center for Policy Analysis

Europe's Steel Industry Modernized and Consolidated

March 26, 2002

Steel companies in Europe have put themselves through a grueling transformation in recent years, while big, integrated American producers, for the most part, did not. So now American mills must hide behind tariffs to protect themselves -- a move which has angered European trade authorities and threatens to become the biggest U.S.-European trade feud in decades.

One of the primary differences is that the Europeans merged until the industry grew to become dominated by a handful of giants that are much bigger than any American rival.

  • In 1980, Europe's five largest steel companies accounted for 30 percent of steel production in the European Union.
  • Today, the top five account for more than 60 percent.
  • By contrast, the top five American companies account for about one-third of the American market -- and they are all much smaller than their biggest competitors in either Europe or Asia.
  • Europe's steel work force has shrunk radically -- from 800,000 in 1980 to fewer than 280,000 today.

While American minimill producers are extremely competitive, the same can't be said for big, integrated producers.

The U.S. steel industry has been hurt by the dollar, which remains at near record highs against the euro, making exports more expensive and imports cheaper. But the biggest obstacle to consolidation in the U.S. is the huge burden of paying pension and health benefits for retirees. That's something European producers don't have to worry about, since in most countries, governments assume those responsibilities.

Source: Edmund L. Andrews, "Europe Versus United States in Steel War," New York Times, March 26, 2002.

 

Browse more articles on Economic Issues