“I would rather own a market than a mill” This may sound like a pronouncement of one of today’s great steel executives. However, while that might seem appropriate, that is not the case.
Rather than challenge your knowledge of the history of the steel business we will provide the answer to the question; who is credited with this quote? The answer is Ben Fairless, the former Chairman of U.S. Steel Corporation from 1938-1955. As one former 50 year veteran of the steel business recounted, “ I smiled when I first noticed this phrase on a wall plaque at the Fairless Hills PA facility of U.S. Steel.” Today that executive is still intrigued by Fairless’s intended meaning and perhaps more so when one considers the relevance to the industry today.
Dominance Is The Key:
Historians refer to this statement as the linchpin of the U.S. Steel Corporations marketing strategy during Fairless’s 17 year leadership. They were most concerned about the dominance in the distribution NOT the production of steel. They wanted to segment the market and sell primarily to those in the industries which they felt they could control. This technique was followed by other mills , particularly Bethlehem Steel. Initially this resulted in partnerships with major distributors. This morphed over time until mills began to assert to control the value added aspects of distribution through mill owned distributor channels like US Steel Supply(USS), National Steel Service Centers(Formerly National Steel) and Ryerson ( Formerly Inland Steel) etc.
The mills at that time did not just want to compete, they wanted to dominate. They wanted protection from import competition, a peaceful labor market with full union support without strikes, and used the period of World War and the Korean war to make national security a central issue, which contributed to their growth and prosperity.
The Modern Steel Market Landscape:
All this history begs the question as to the application of that catch phrase “I would rather own a market than a mill” in today’s US Steel industry. It appears that mills are still looking to segregate and dominate specific markets both geographically and through specific products.
One steel industry veteran commented, Cleveland-Cliffs as an example is trying to acquire U.S. Steel to dominate the Midwest region, specifically the automotive sector, with special emphasis on Electrical steel products. National security, labor relations peace, and protection from foreign producers is the same song played by different musicians. The auto manufacturers in that region fear the monopoly of production for most of their key products and have already voiced their objection to Cleveland-Cliff’s efforts to purchase U.S. Steel. Do not be surprised if Cleveland-Cliff’s promotes the acquisition of U.S. Steel’s Midwest operations and suggests again to let Nippon acquire Big River Steel, which is located in Osceola, Arkansas and is outside of the Midwest region. This strategic move of a divided purchase where both Nippon Steel and Cleveland-Cliffs get a part of the former U.S. Steel may find acceptance by the USW and support among all the political parties. This example is of course all hypothetical but certainly possible. Only time will tell how this acquisition will play out. The saga continues to be closely watched by stakeholders across the steel industry, labor unions, environmental groups, and the US government.
Both Arcelor Mittal and Nippon Steel share some of the same thinking but Nippon’s real target, which is U.S. Steel’s Big River facility, one of the newer US steel mills. Combing with the Calvert, AL mill may pose a major threat to other mills in that region. Japanese distributors and car manufacturers may again be the targets of a good deal of the joint venture production.
Nucor’s recent purchase of CSI in California is yet another example of the desire to dominate in a region (The West) and continue to seek protection from imported steel. Other producers on the West Coast may have a difficult time competing successfully especially as Nucor upgrades and expands capacity.
Steel Dynamics (SDI) appears to be choosing to focus more on Coated and Pre-painted steel products using two distributors (United Steel Supply and New Process Steel) and some manufacturers(New Millennium Buildings) to better control the downstream value added aspects of their production.
Pricing Stability Is Key:
The last piece of this puzzle is pricing stability. Recent efforts to publish market pricing by both Cleveland-Cliffs and Nucor may not so much a battle for price leadership as it could be an effort to find ways to avoid large fluctuations in market pricing. The idea to call their actions market sensitive and transparent is just another way to signal the market of their intentions. Initially these methods were meant to address the spot markets. It may not take too long for these same tools to be used in longer term contractual negotiations.
Conclusion: The Enduring Relevance of Market Control
The historical quote, “I would rather own a market than a mill,” serves as a stark reminder that the some of steel industry’s core objectives is not just about producing steel, but rather generating profits. The fundamental lesson learned by history is not for mills to produce more steel but to produce more profits. Yes indeed, some would rather own their markets than their mills. This philosophy, evident throughout industry history and present in the strategic maneuvers of contemporary steel giants, underscores the enduring pursuit of market control, encompassing not only production capacity but also distribution channels, targeted customer segments, and ultimately, market dominance.
If you enjoyed this editorial on the Market Dynamics of the Steel Industry be sure to check out some of our other articles about the Steel Market
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