Big Drop in European Steel Demand

I read this article about European steel. Unfortunately, the recession is negatively affecting several industries. Because of the decrease in the production of new cars, the demand for steel has greatly decreased. Cash for Clunkers was a weak attempt to increase car sales in hopes that the other industries connected to the car industry, including the steel industry, would be stimulated as well as the auto industry. This may have worked on a small scale, but once the program was no longer available the car industry, as well as the industries connected to the car industry, returned to their depressed state.
The article goes on to discuss how some steel companies are considering starting anti-trust procedures against other steel companies because they were supposedly acting in cartels. The recession has encouraged the steel company to go on a witch hunt. They are desperate to decrease competition in an attempt to gain market share and rebound from economic strife.
Once the economy rebounds, the car and steel industry will rebound as well. As the article mentions, a rebound will take time. Until then auto and steel makers will have to be innovative to cut costs and gain market share.


Leah said...

It is interesting that the market environment changes so much with a recession. Company roles in the market have to change in order to maintain solvency. In fact, market share becomes available as the dynamics of the market change. This is a concept that firms have to understand in order to make it through recessionary periods. As companies learn to change with the times it creates growth opportunities.

Kyle said...

The whole idea of a "witch hunt" is a little troubling. It is definitely unfortunate that the steel industry is having some tough times with the recession, but attempting to take out the competition through regulatory issues is not the best answer. I agree that businesses must do what they can to remain solvent, but like Leah said, innovation and creativity are the answers. I fear that "protected" industries like the steel industry have lost some sense of adapting and creating opportunities by relying on legal mandates and regulations to save them. It is unfortunate that more and more of the free-market firms in the world are following these same methods.

Dr. Tufte said...

This is a good issue to turn on its head.

Why would an industry have a regulatory apparatus that could be gamed this way in the first place? How did the steel industry ever get so lucky? Perhaps they planned it this way.

Maybe they really haven't been about steel for a long time. Perhaps their core competency is actually managing their regulatory environment? You've all probably heard the observation - many people think it is a joke, but it isn't - that GM is a healthcare provider that makes cars to pay the bills. Perhaps these aren't really steel companies at all, but instead they're just predatory rent-seeking law firms, that use steel production to smooth cash flows.