Ironically, the upbeat, sometimes record-high, third-quarter earnings reports issued by the world's major steelmakers and iron ore miners came out in the midst of a rapid collapse in steel demand and steel prices.

In response, the industry has temporarily idled 50 percent of capacity in most markets to match supply with demand. Ominously, in mid-November China announced that it would lift export taxes on some steel products.

The fourth quarter promises to be a report card on a major test of management skills—managing through low-cycle economic activity. In fact, this test appears to be more severe than any down cycle in the past 35 years. Steel companies must plan and prepare for the down cycle in good times—a very difficult proposition. Once demand and prices collapse, there are very few options available to mitigate the impact.

For those companies with United Steelworkers union contracts, the fourth quarter will be the first full quarter with the newly negotiated...