Class 07 of Friday 25 September 2015
Steel discussion
• steel = ?
= technical definition
» steel is iron + small amounts of carbon
» inputs (upstream)
› iron ore
› coal ⇒ coke
› limestone
= market: who uses
» autos
› very specialized uses
» lots of minor uses as part of lots of things
» construction = 80%
› commodity
= markets: who makes
» integrated producers, e.g., US Steel or Nippon Steel
› cheap ocean transport
» minimills: scrap metal + electricity
= oligopoly
» ? economies of scale ?
= shifting vertical integration
• QUESTION FOR MONDAY:
» Why no price wars in steel?
• additional questions
» Fixed costs versus variable [for us economists, marginal] costs
» demand elasticities ← → potential for sustainable margins
• questions to think about over the next weeks
» substitutes for steel
» role of technical change
» do mergers help firms? if so, which / when?
» impact of globalization
› interactions with cost structure
› interactions with local versus global variance in demand
» how manage a steel company
› alternative phrasing: what background do CEOs have and why?