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Steel Industry Restructuring and Location


F. Giarratani
R. Madhavan
G. Gruver

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In this chapter, we link technology-based competition, demand patterns, and managerial agency to describe and explain the process of restructuring in the American steel industry in terms of its economic geography and in the context of sweeping changes in the industry's global structure. Between World War II and the end of the1960's, the American steel industry was dominated by large integrated steel producers. During this period, competition was primarily among integrated firms and the location decisions taken during the period concerned individual production units within those firms. Between the 1970's and the 1990's, a new kind of competition re-shaped the economic geography of the American steel industry: employing scrap-based production methods, minimills emerged to challenge the integrated producers. Shifts in demand away from the previous geographical core combined with aggressive investments by minimill managers in production capacity and in capability upgrading to drive home the minimill advantage. Finally, with the turn of the century, world steel markets began to reshape based on globalization. Energized by liberalization and privatization in many parts of the world, and supported by information technology and managerial innovations that increased spans of control, steel firm managers employed aggressive mergers & acquisitions to create the first large-scale steel multinational corporations. During this period, consolidation redrew the boundaries of firm competition, and foreign steel firms emerged as owners of a major share of American steelmaking capacity. Moreover, increases in the world demand for steel and world steelmaking capacity had profound effect in reshaping the economic geography of the competitive landscape. By examining these critical periods of restructuring in the steel industry, the role of economic geography as a competitive factor is exposed, and context is provided for understanding the regional and spatial implications of competitive adjustment.