Nerds of Steel

Below is a presentation I made recently at the SMA Board of Directors meeting in Florida. It deals with the issue of organizational size in today’s steel industry and asks some questions (more than providing any answers) about how the structure of steel organizations will change as they deal with much different dimensions of scale and scope. It also contains some provocative “Zipfian” statistical analysis of industry structure that raises questions as to how consolidation might proceed both in the US and globally.

In the end, there is no argument for or against big or small organizations here. Mittal after all was producing less than 500KT 20 years ago. But in the future, our industry will be populated by much larger organizations than it is today. Organizational innovation is going to be vital to the strategic health of any company of any size that wants to remain successful and independent. Click on the presentation’s ‘Menu’ button (lower right) to see a larger view.

Until a few years ago the steel industry was considered mature, and the moniker was accurate. Global steel demand grew more slowly than did the world’s population. In much of the developed world, demand for steel was stagnant after having gone through a long period of decline. Since 1998, however, the steel industry seems to have re-ignited its growth engine and kicked into a new gear. The industry has been growing at 6% annually and most analysts see strong growth continuing for a decade or more. What explains the steel industry’s reemergence and can it continue?

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The IISI published its short range outlook October 8. Here’s the link. It’s not available in any better form than a PDF, but that’s attached, IISI Short Range Outlook 10/8. The summary table is shown below:

Table 1: Short range outlook for apparent steel use (2006-2008) in ‘000 of tonnes

Regions	2006	2007	2008	% 05/06	% 06/07	% 07/08
EU-27	184.9	192.2	195.0	11.4	4.0	1.4
Other Europe	27.2	29.3	31.0	11.0	7.8	5.7
C.I.S.	50.0	59.8	65.2	18.1	19.5	8.9
N.A.F.T.A.	155.7	148.1	153.9	11.5	-4.9	4.0
Central and South America	35.6	39.5	41.6	11.8	10.9	5.2
Africa	23.1	25.1	27.5	11.4	8.9	9.5
Middle East	37.3	40.4	43.4	9.8	8.4	7.5
Asia (inc. Oceania)	607.2	663.2	721.1	6.2	9.2	8.7

Regions	2006	2007	2008	% 05/06	% 06/07	% 07/08
World	1,120.9	1,197.7	1,278.6	8.8	6.8	6.8
BRIC	457.8	516.6	573.9	9.8	12.8	11.1
Rest of the World	763.5	799.6	834.8	8.7	4.7	4.4

Here’s some of the largest steel company data from Metal Bulletin. Just click on the link below to be taken to a full version of the spreadsheet snapshot shown here.

EditGrid Spreadsheet by user/jasmo58.

Here is a list of the top steelmakers in the world, as measured by crude steel production, from 1988 to 2006.  iisi-top-steelmakers-1988-to-2006.pdf