Steel Mills Are Changing – Take Two

Shortly following the end of WWII, many special military grades of steel became available to feed the ravenous growth in industries like housing and manufacturing. During that boom, the commercial sector found uses for new steel grades developed by the military, and price was not an object. Existing steel mills previously occupied with feeding into the war effort, misjudged the massive needs of a burgeoning private sector.

Armor Plate became wear plate liners for steel mills and mine trucks. Hardened alloy round bar intended for gun barrels on battleships became mandrels and line shafts. The clamoring public would end up consuming all that was available and that which was not yet available. During the next 30 years or so, even newer grades were developed with special properties needed by big users and big buyers. Automotive, Appliance, Railroad, Mining, and an upgrading military drove invention and innovation. That amalgamation of industry was dubbed “The smoke stack industry”. Steel salesmen were “Smoke stack chasers”. If you were a part of that smoke stack industry, your request for a special modified grade of steel saw it quickly become a standard grade or stock size.

New alloy grades, new production methods, new shapes and sizes would soon become the bread and butter items for steel sellers. In the latter part of the twentieth century, it was hard to imagine a size that was not a stock size in whatever shape. But, the driving forces of heavy industrial activity are cyclical. In time, and on the buying-side of the equation, designs would change, requirements diminished, saturation achieved. On the supply-side, steel mills would react to the cyclical downturns by limiting production or “Hot idling” mills. (Putting them into a short hibernation).

Mills accepted the unavoidable downturns but nothing immediately coordinated industry’s permanent disuse of an item with the mills eagerness to accommodate the needs of those industries. All was viewed as the cyclical behavior; the natural order of things. Nothing specifically identified “gone-forever” items. Right about at this time, the concept of mega-mills was gaining traction. Capabilities of the mills, along with the efficiencies were being improved.

Mills reacted to this ebb and flow by limiting production of certain items to coincide with industrial cycles. Some items would disappear from the menu of available steel, but only until times got better. A signal of economic rebound brought a rebirth of increased production to include not just new demand, but to align production with virtually the same menu of sizes and shapes offered before the “correction”. Important buyers needed only to wait until the next upturn, at which time they could order their new unique items, comfortable in the knowledge that they would also have the ability to order standard, or, stock sizes when and if they needed. Like sugar and bread in a grocery store; there when needed.

For decades that symbiotic relationship seemed destined to go on forever. But, in time customers became more educated at recognizing and predicting boom and bust cycles. They began to hate the bust cycles and incorporated inventory management procedures and systems to assist them in limiting purchases to all but critical need items. Steel service centers, the now and again marketing arm of steel mills, subsequently began to make adjustments to their own inventories. Altruistic philosophy be damned. If you’re not going to sell it, don’t stock it! The attractive mill price of big tonnage orders became not so attractive, definitely not sufficient to offset the detrimental effects of maintaining a grossly obese inventory. Now, the monster sized “Feed me Seymour” steel mills had to react. Smaller appetizer orders from industry did not fill the bill. So, into a climate of tonnage resistance from astute service centers and with pragmatic acceptance of the realities of their existence; the mills launched programs requiring even greater tonnage orders. Eventually, they would be required to prune back their offerings (grades, sizes, and shapes), strategically re-align or network with more responsive and efficient mini-mills and processors; or go into a “Cold Shut-Down”. Generally, the state of being a little bit dead.

-Howard Thomas, Sep 27th 2019

 

 

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