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Who’s in charge of market growth in the steel industry?

Keywords: Tags  Thomas C. Graham, M&A activity, steel, parting shots


Steel companies are beset with a bewildering assortment of challenges, all urgently requiring resources to deal with real problems, now.

Markets must be defended against illegal trade incursions; environmental regulations multiply and demand immediate compliance; costs must be constantly attacked in a climate of 70-percent operating rates; capital applications far exceed the funds available, so hard choices must be made; and funding the enterprise, both short and long term, requires constant attention. There has been important M&A activity, and there may be more. As desirable as it may be from an economic standpoint, market consolidation rather than market growth is usually the result.

The business that does not increase market demand for its own products risks stagnation. In the United States, market demand for steel products has been declining, so this concern may be dismissed by some as an “industry” problem. That it may be, but it is unlikely to be solved by “industry-sponsored” activities. History shows that the most important contributions to market growth have been the result of individual steel companies acting in their own self interest. Products such as Cor-ten, Galvalume, high-tensile bolts, 409 stainless and many others were the result of a combination of strong technical activity and smart commercial work to identify and exploit a new market. This requires highly talented, strongly motivated people. It does not require a cast of thousands.

Producers have created high-strength steels for automotive applications, a difficult metallurgical process. But opportunities abound that do not require sophisticated metallurgy, and astute people from the commercial world are well equipped to identify the most promising areas of growth. There has been an all-consuming focus on process development--for good reason--but a well-balanced steel company should always be able to answer the question posed in the headline.

Steel companies can partner with selected processors/customers to develop and market new steel products at the retail level. It is not suggested that the steel company intrude on the final manufacturing process in a move that would displace the steel company customer. A clear success has been the deployment of steel roofing. In addition to the steel supplier, a paint line operator and a fabricator have done the necessary missionary work with architects and builders to expand a market for steel.

All steel company executives have been subjected to the disdain of security analysts who speak to the performance of a steel company as “difficult--but it is a commodity,” but successes have come from emphatically not viewing products as commodities. A healthy and prosperous steel industry competes vigorously on quality, price and service--and products developed for the market.

Thomas C. Graham is a founding member of T.C. Graham Associates. He is a former chairman and chief executive officer of AK Steel Corp., president and chief executive officer of Armco Steel Co. LP, chairman and chief executive officer of Washington Steel Co., president of the U.S. Steel Group of USX Corp. and president and chief exec utive officer of Jones & Laughlin Steel Co. His column appears monthly. He invites readers’ comments and can be contacted at tom.graham@tcgrahamassociates.com .

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