Decades ago, a comedian joked that rooting for the New York Yankees was “like rooting for U.S. Steel.” Nearly no one remembers the comedian, but the joke has endured because it compels the audience to realize that indestructible things are impressive, even intimidating, but they bring very little excitement. They generate no passion.
I’ve spent most of my life as a Yankees hater, because they never seemed to suffer any setbacks. But the comic’s observation is even more pointed: U.S. Steel was more than powerful. It was massive – employing tens of thousands and producing as much as 35 million tons/year of steel, in every grade and shape that manufacturers needed, in every part of the country where cars were produced or oil-and-gas was drilled, or skyscrapers soared. USS was permanent, unmovable, and invulnerable.
In 1952, it was U.S. Steel leading the way in challenging President Truman’s effort to nationalize the domestic industry rather than side against Big Labor. The Supreme Court ruled for U.S. Steel. In 1986, the company endured a six-month strike that shut down all its operations, and then emerged as a leaner and more cost-effective business, with a new labor agreement that eliminated about 5,000 jobs.
But U.S. Steel is vulnerable now. It’s no longer a monolith, and by the time you read this it may be more of a memory. The steelmaker rejected a $7.3-billion takeover approach from Cleveland-Cliffs, the current manifestation of several old rivals, but that show of independence was merely a stall. The company is on the block and it will be acquired – and what that means should be relevant to anyone who takes seriously the business of manufacturing, the resilience of the domestic economy, and the potential for free-market creativity.
There’s no reason to think that Cleveland-Cliffs or any buyer can restore the luster of U.S. Steel, or that it wants to build a commercial presence where skilled people are rewarded, creative people thrive, and stable communities grow – because none of those things can be quantified. The value was in the idea, not the transactions. U.S. Steel was a punchline when it was powerful, but now it’s on the brink and that calls into doubt once again the assumptions that shaped our lives over the past 100 years.
U.S. Steel is vulnerable now because, firstly, steel can be expensive to make but cheap to buy. Things are manufactured in steel because it lasts – meaning steelmakers count on new things (cars, trucks, pipelines, buildings, roads and railroads, power plants, and so forth) being manufactured or built in order to continue producing and selling. Spot steel prices have been dropping all year, and even flat output rates have not slowed the decline.
And steel produced a year ago or five years ago but still sitting in warehouses may be hedging against the profit margins of U.S. Steel and its cohort. Also, steel is a global commodity, meaning the steel produced elsewhere at a fraction of the cost and without the environmental or safety regulations observed by producers in North America or Europe is a drag on the potentiality of businesses like U.S. Steel.
Decades of trade policies that impose tariffs or punish import violators have not altered the reality of the steel industry. The material’s value is its ubiquity and durability – which means competitors will always be vying for your position in the market.
Don’t assume that steelmakers have not done all that technology will allow to improve their position. They are orders of magnitude more efficient than they were when USS survived the 1986 strike, and they are not the dangerous and dirty operations that ideologues deride. But that only makes them more attractive acquisition targets.
It’s simply a fact that U.S. Steel has arrived at the point when its defenses are gone. Metalcasters will recognize this spot: it is not for its mistakes or misjudgments, or the past catching up with it that U.S. Steel is now vulnerable.
The reason is that its critics and its pursuers – and to an extent its own management – are treating U.S. Steel as a commodity valued according to its assets and liabilities, and not for the space it occupies in our understanding of what is admirable, or reliable, or permanent.