Technology and Steel Industry Competitiveness (June 1980)
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Technology and Steel Industry Competitiveness June 1980 NTIS order #PB80-208200 —- -— Library of Congress Catalog Card Number 80-600111 For sale by the Superintendent of Documents, U.S. Government Printing Office Washington, D.C. 20402 Foreword A severe downturn in the domestic steel industry in 1975-76, coupled with continued increases in steel imports, led to widespread concern about the indus- try’s future. In October 1977, the House Ways and Means Committee’s Subcom- mittee on Trade requested that OTA examine how technology might be used to im- prove the industry’s international competitiveness. The brief recovery of 1978-79 appears to be over and, with another downturn on the horizon, the following con- cern expressed in the Subcommittee’s original request seems just as relevant today: While it is possible that some short-range solutions to the current world steel crisis may be developed in the near future, the need for a long-range policy will re- main, This report focuses on the creation and adoption of advanced technology in the U.S. steel industry. Although it is not a comprehensive study of the industry, it does examine nontechnological factors that shape the environment in which new technology is created and adopted. OTA finds that a number of technological opportunities exist for improving the competitiveness of the domestic steel industry. The industry consists of dif- ferent types of firms with markedly different performances, and this report iden- tifies the opportunities for new technology and new policies that apply to each. It examines the costs and benefits of specific Federal policy options, and constructs several scenarios for the next 10 years to assess how these options would affect the industry and the Nation. The domestic steel industry remains vital to the economic well-being and na- tional security of the United States. However, technology alone cannot solve all of the industry’s problems. Given the complexity of these problems, the technology- related policy options in this report should assist any congressional debate on a national policy for renewal of the domestic steel industry. JOHN H. GIBBONS Director . Ill Steel Industry Assessment Advisory Gordon H. Geiger, Chairman University of Arizona Edmund Ayoub Betty Jardine United Steelworkers of America League of Women Voters James Cannon Ruth Macklin Citizens for a Better Environment The Hastings Center Robert W. Crandall Peter F. Marcus The Brookings Institution Paine, Webber, Mitchell, Hutchins, Inc. Milton Deaner Donald R. Muzyka National Steel Corp. Carpenter Technology Corp. Steward G. Fletcher* Mary Ann Ritter William E. Dennis General Motors Corp. American Iron and Steel Institute Roger E. Shields William B. Hudson Chemical Bank Davy, Inc. Edward A. Stanton Robert R. Irving Diocese of Youngstown Iron Age Magazine Catholic Charities F. Kenneth Iverson Caroline Ware NUCOR Corp. Board—National Consumers League NOTE: The Advisory Panel provided advice and comment throughout the assessment, but the members do not necessarily approve, disapprove, or endorse the report, for which OTA assumes full responsibility. *After February 1980 replaced by Dr. Dennis because of retirement from AISI. Acknowledgments This study was initiated in the OTA International Security and Commerce Program. The assistance of Henry Kelly, former Program Manager, and Dorothy Richroath and Helena Hassell of the administrative staff is acknowledged. iv Steel Industry Assessment Project Staff Lionel S. Johns, Assistant Director, OTA Energy, Materials, and International Security Division Audrey Buyrn, Materials Program Manager Joel S. Hirschhorn, Project Director Antoinette B. Kassim, Analyst Administrative Staff Carol A. Drohan Patricia A. Canavan Stanley Hampton Michelle Landy Margaret M. Connors Contractors Adams and Wojick Associates John E. Newman, Research Assistant G. K. Bhat Gustave J. Rath J. K. Brimacombe Charlene Semer, Editor Frank A. Cassell Sterling Hobe Corp. J. A. Clum Karen Stoyanoff Sven Eketorp George R. St. Pierre and Associates Richard W. Heckel Phillip Townsend Associates, Inc. Arthur D. Little, Inc. OTA Publishing Staff John C. Holmes, Publishing Officer Kathie S. Boss Debra M. Datcher Joanne Heming . — Participants— OTA Seminar on New Techniques in Steelmaking, May 2 and 3,1979 Robert N. Anderson R. S. Dalal Donald R. Muzyka San Jose State University NUCOR Corp. Carpenter Technology Corp. D. Apelian John F. Elliott H. W. Paxton Drexel University Massachusetts Institute of United States Steel Corp. M.D. Ayers Technology Richard K. Pitler Metal Innovations, Inc. Stewart G. Fletcher Allegheny Ludlum Steel Corp. Thomas E. Ban American Iron and Steel Y. K. Rao McDonnell-Wellman Co. Institute University of Washington G. K. Bhat Gordon H. Geiger Kenneth J. Reid Carnegie-Mellon Institute of University of Arizona University of Minnesota Research William R. Gray Gerhard Reuter J. K. Brimacombe Inland Steel Co. Lurgi Chemi u Huettentechnik University of British Colombia Peter L. Gulliver GmbH. James Cannon Foster-Wheeler Ltd. Stephen R. Satynski Citizens for a Better A. J. Klein Rensselaer Polytechnic Environment American Can Corp. Institute Jack W. Clark J. A. Lepinski George St. Pierre Westinghouse Research & Allis-Chalmers Corp. Ohio State University Development Center Lawrence C. Long Andres J. Syska James A. Clum Armco, Inc. Wingaersheek, Inc. University of Wisconsin— Donald R. MacRae Edward M. Van Dornick Madison Bethlehem Steel Corp. M. K. Witte Donald H. Cookson Stanley V. Margolin UOP, Inc. Dravo Corp. Arthur D. Little, Inc. vi Contents Chapter Page 1. Summary . .. .. s ......000...0000060 .Oo. co”””” 3 2. Policy Options . .9 .. .. .. .0 $..O. $..OS $00 ..O*OOOOG”GO 27 3. Problems, Issues, and Findings . 73 4. The Domestic Steel Industry’s Competitiveness Problems . 115 5. Past and Future DomesticUse of Steel. 155 6. New Technologies for the Steel Industry . 185 7. Technology and RawMaterials Problems . 221 8. Technology and Industry Restructuring . 247 9. Creation, Adoption, and Transfer of New Technology . 267 100 Capital Needs for Modernization and Expansion . 309 11. Impacts of EPA and OSHA Regulations on Technology Use . 331 12. Employees and the Development and Use of New Technology . 363 vii CHAPTER 1 Summary Contents List of Tables Table No. Page International Competitiveness Problems of 1. Projected Growth in Direct Reduction theU.S.Steel Industry•• ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● 4 capacity, ViqMOOO**•• ● ● ● . ● ..• ● , ● ,0. # 12 2. and Trade Policy Options *aes*** *a** ***s **** s* **v* 5 U.S. Performance *•* ● *•* ● .•• ● ● ● * ● ., ● ● * ● ● ● ● 18 Futree Chamges in Technology . 9 3. Estimated Decline in Actual Productive Continuous Casting.. 9 Capability of Coke Oven Plants in the Direct Reduction of Iron Ore . 11 United States: 1973 v. 1979. ● . ● ● . ● * ● o ● ● ● 19 Other Future Technologies... 13 Capital Needs for Modernization and ● **0e*9* **** **m ***********s 13 Different Estimates of Capital Needs . 14 Industry Restructuring_. ● . 15 Steel Use and Future Demand ● *a. ****e**** 16 I List of Figures I A Future Steel Shortage? . 17 I i Problems With the Creation, Use, and Sale Figure No. Page 1. U.S. Exports-Share of World Steel ● ● ● ● ● ● ● ● ● ● ● ● ● ● * ● ● * ● ● ● ● 17 of Technology Trade, l945-77 . 4 Raw Materials Problems ● ● ● ● . ● ● ● ● Q ● ..• ● ● ● 19 U.S. Trade Balance in Iron and Steel Coke and Coke Ovens ● . ● , ● , ● . ● ● . ● . ● ● 0, ● c, 19 1927-70 . , ● . ● . , ‘ . ● ● ● J. , . ● ● , , , , ● ● ● ● , ● 4 Ferrous Scrap ● *.****.*******..********* 19 3. Continuous Casting Apparatus . 10 4. The Diffusion of Continous Casting, 10 Impcts of EPA and OSHA Regulations on Countries, 1962-78 . 11 Technology Use ● ● ● ● ● . ● ..•,.• ● ● ● *• ● ● ● ● 20 Impacts of Regulations on Industry.. 21 5. Schematic Diagram of Direct Reduction Cost Effectiveness of Control Technologies . 21 Processes . ~.. 12 6* Annual Gapital Costs for Productive Industry Expenditures on Controls . 22 Steelmaking Facilities Under Three Employment Practices and New Technology . 22 Modernization Scenarios. ., . “ 14 Technical Workers. 22 7. Range of Projected Domestic Demand for Hourly Workers . 22 Steel. 1980’-90• ● ● . ● .. .,,, ● ● ● .,. * , ● ● ● ● 16 CHAPTER 1 Summary Summary Steel will probably remain the world’s Multilateral Trade Agreement is enforced most important engineering material, and the vigorously. steel industry is vital to the Nation’s security and economic prosperity. It is possible, how- After a decade of restructuring, moderni- ever, that continued low profitability and zation, and expansion, the industry could adopt major new steelmaking innovations if some Federal Government policies, such as long depreciation times for new facilities, will the Federal Government supports basic re- search in steelmaking (which barely exists to- cause the domestic steel industry to contract day), provides incentives for more industry substantially. Many jobs could be lost and the Nation might become vulnerable to scarce R&D, and assists in pilot and demonstration and high-priced imports, which by 1990 could projects. Major process innovations around account for 40 percent of the domestic mar- 1990 could then give the domestic industry a ket, compared with recent levels of about 15 competitive advantage, rather than mere par- percent, ity with foreign industries. This is the type of long-range strategic technology planning that The U.S. steel industry can be revitalized the industry has neglected in the past. through increased investment in research