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Meeting the Challenge of Globalisation

- Steel Industry Restructuring and


Trade Union Strategy

A Survey Report for the

International Metalworkers' Federation

compiled by

Nicolas Bacon and Paul Blyton

Dr Nicolas Bacon, Nottingham University Business School, Nottingham NG8 1BB, UK


nicholas.bacon@nottingham.ac.uk

Professor Paul Blyton, Cardiff Business School, Cardiff University, CF1 3EU, Wales UK.
blyton@cardiff.ac.uk
Contents

PREFACE ..........................................................................................................................................1

1. INTRODUCTION .....................................................................................................................2

2. WORKING IN A GLOBALISING STEEL INDUSTRY.........................................................4

3. OWNERSHIP & OWNERSHIP CHANGE ............................................................................8


Does Ownership Matter? .....................................................................................................9

THE IMPACT OF PRIVATISATION .............................................................................................11


Acquisitions and Joint Ventures......................................................................................12
Foreign Ownership in Steel Companies.........................................................................15

4. THE IMPACT OF MINI-MILLS ..............................................................................................16

5. WORK RESTRUCTURING ..................................................................................................18

6. TRADE UNION STRATEGIES.............................................................................................20

7. THE MAIN ISSUES: A COMMON UNION AGENDA? ..................................................22


Key Issues Now and Over the Next 5 Years .................................................................22
Bargaining Priorities............................................................................................................23
Union Policies.......................................................................................................................23

8. INTERNATIONAL LINKS BETWEEN UNIONS..............................................................25


Extent of Links......................................................................................................................25
Priorities for Co-operation .................................................................................................26
Building Co-operation .........................................................................................................26

9. CONCLUSIONS AND RECOMMENDATIONS.................................................................28


Conclusions .........................................................................................................................28
Recommendations...............................................................................................................30

Annex 1 -National unions included in survey. ......................................................................32

Annex 2 - Integrated sites included in survey .......................................................................33

Annex 3 - Mini-Mill sites included in survey............................................................................37

REFERENCES ...............................................................................................................................37
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List of Tables
Table 1 The changing experience of work reported by national unions over
the previous 5 years (percentages) ............................................................................4

Table 2 The changing experience of work in 92 integrated sites


(percentage reporting).............................................................................................. 5

Table 4 Integrated steel plants reporting most and least improvements


to terms and conditions ............................................................................................ 6

Table 5 Areas of co-operation and conflict between national steel unions


and employers (percentages reporting).....................................................................7

Table 6 Percentage of integrated sites reporting changes to terms


and conditions over the previous five years, by ownership .....................................10

Table 7 The effects of privatisation reported by national steel unions


(percentages reporting) ...........................................................................................11

Table 8 Industrial relations and training in integrated sites by change of ownership


(Percentage reporting).............................................................................................13

Table 9 A summary of the implications for industrial relations and terms


and conditions of any change in ownership ............................................................13

Table 10 Changes to terms and conditions in integrated sites by ownership change


(percentage reporting).............................................................................................14

Table 11 National union views on sites with foreign investment compared to


domestically owned sites (percentage reporting) ....................................................15

Table 12 A comparison of industrial relations in integrated sites and mini-mills....................17

Table 13 Integrated sites and mini-mills reporting increases in flexible contracts


compared to 5 years previously (percentages) ........................................................18

Table 14 Reported presence of high involvement work practices applied


to over 50 per cent of employees.............................................................................19

Table 15 Trade union strategies pursued during last 5 years (percentages) ...........................21

Table 16 National union policies (percentages reporting) ......................................................23

Table 17 National union policy on state aid (percentages reporting) ..................................... 24

Table 18 Plant level links to other similar steelworks (percentages reporting).......................25

Table 19 National links with steel unions in various parts of the world
(percentages reporting) ........................................................................................... 25

Table 20 The benefits from closer links with steel unions in other countries
(percentage reporting).............................................................................................26

Table 21 National union views on the role the IMF should play in future
international co-operation. ...................................................................................... 27
Preface

The process of economic globalisation has left no sector of the world economy untouched.
However, the steel industry was, until relatively recently, much less affected than most other
sectors.

Factors such as strategic importance, which explained why so much of the steel industry
came under direct government influence, if not ownership; along with the high capital costs
and rigidity of investment in large integrated steelplants; and its susceptibility to swings in the
economic cycle; all mitigated against the development of multinational steel companies.

However, in the past two decades the steel industry has undergone a major transformation.
The combined effects of the widespread privatisation programmes, often at relatively low
prices; the requirements of important steel-consuming multinational companies to source their
steel supplies from a single company; along with the benefits derived from economies of
scale; and the high costs of shipping large quantities of relatively low value to weight cargoes,
provided both the opportunity and the motivation for steel companies to expand beyond their
national boundaries or, as in the case of the LNM Group's Ispat International, develop a truly
global steel company.

The concentration of ownership arising from these developments further incr%ases the level
of competition, resulting in further pressure to reduce production costs and in particular
employment costs.

The shift in the focus of competition, from the national to the international level, and the much
wider range of factors now affecting industrial relations, has proved problematic for many
trade unions that are, most commonly, organised on a regional or national basis.

Recognising the need to develop appropriate trade union strategies, the IMF undertook a
survey amongst its membership in the steel industry, to identify common problems and
priorities.

It is hoped that the findings of this survey will provide trade unions in the steel industry with the
knowledge and understanding they need to develop effective structures and strategies, that
will enable them to effectively represent their members in the face of the changes and
challenges associated with globalisation.

I would like to thank all of those who participated in the survey and in particular Professor
Blyton and Dr. Bacon, who were responsible for preparing this report, for their efforts to help
us obtain a better understanding of the problems we are facing and how best to cope with
them.

Marcello Malentacchi
General Secretary

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1. Introduction

Globalisation in the iron and steel industry appears to be moving apace and is raising
important issues and challenges for trade unions. In practice, ‘globalisation’ encapsulates
many different aspects of change notably: structural changes in trade, economics, products
and technology; the decline of national and regional state regulation; the emergence of
international or global companies; and different recipes for restructuring organisations, in
particular, previously established working practices. In this way, globalisation is a summary
term for a set of inter-related changes rather than a single development. As a result of this
multi-faceted character of globalisation, the precise effects of the different elements for trade
unions and their members have often not been clear. Two widespread problems have been
that first it has become commonplace to assume that the changes taking place lie beyond the
influence of individual companies, governments or trade unions, and second that almost any
change taking place has been attributed to 'globalisation'.

This is highly misleading, however. For above all, globalisation is fundamentally a


management strategy, designed to gain competitive advantage through the global
organisation of product and labour markets. And, like any management strategy, globalisation
is partly constrained by, and open to influence from, those working within the industry and their
representatives. Understanding globalisation, and formulating views and policies regarding
how to influence the process, is made even more important for trade unions given that the
individual elements of globalisation may have different implications for labour, and these
elements are not all moving at the same pace.

With this in mind, the International Metalworkers’ Federation (IMF) has been seeking to
identify the effects of the different features of globalisation upon workers in the steel industry,
and stimulate greater dialogue about how trade unions are responding, and should respond in
the future. This report marks an important stage in the development of this dialogue. The
report presents some initial findings from a world-wide survey commissioned by the IMF and
designed and analysed by Dr Nicolas Bacon and Professor Paul Blyton of Nottingham and
Cardiff Universities in the UK, who have also compiled this Report.

The purpose of this survey was to:

document some of the main developments taking place

consider which aspects of globalisation appear to pose the most significant


challenges for workers and trade unions in the industry

present some initial findings on the issues facing steel unions world-wide, and

stimulate further discussion among trade unions.

In many steel plants, management are referring to the pressures of globalisation to justify
changes in terms and conditions of employment and the reorganisation of work. It is

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necessary for trade unions to assess three inter-related questions when faced with such
demands for change:

1. Are the changes that managers are pursuing a direct consequence of globalisation?
2. What are the effects of these changes on steelworkers?
3. How should trade unions respond in order to most successfully represent their
members’ interests?
For trade unions to assess both current and impending changes stemming from
management’s globalisation strategies, it is necessary to identify and analyse the key
features of globalisation. In this report systematic evidence is presented on how the following
changes are affecting terms and conditions of employment and industrial relations:
• the continuing privatisation of state-owned companies
• other changes in ownership of steel plants including joint ventures, company acquisitions
and the transfer from private to shareholder ownership
• growing ownership by foreign companies
• the effects that mini-mills are having upon employee relations within the industry
• work re-organisation and the search for high performance work practices
• trade union strategies towards management and inter-union relations

On the basis of the survey findings on these and other issues, the agenda for trade unions is
considered through a series of questions:
• do the experiences of steelworkers across countries and plants differ significantly?
• are trade unions utilising similar or different tactics to influence outcomes?
• are common bargaining priorities emerging?
• what international links already exist and what are the main barriers to closer international
co-operation between unions?
• how best can the IMF develop its approach to represent the interests of all of their
members?
To gather the necessary information to begin to answer these questions, surveys were
dispatched during 1998 with the final returns in early 1999. It total, the survey involved three
different questionnaires, aimed separately at national unions, together with samples of both
integrated steel plants and mini-mills represented by each IMF affiliate. Data from over thirty
countries forms the basis of the report. A total of 39 national trade unions completed
questionnaires along with responses from 92 integrated sites and 48 mini-mills. A full list of
participating unions, plants and countries is included in the Annex. Though the final picture is
inevitably incomplete as non-union plants were (with one exception) omitted from the survey,
nevertheless this survey represents the largest and most detailed of its kind ever undertaken.
The authors of this report and the IMF would like to extend their appreciation and thanks to all
those who kindly gave up their time to complete survey returns.

This report contains eight sections. In the first section we discuss changes to terms and
conditions and in the second section explore ownership factors. The third section considers
mini-mills and the fourth work restructuring. Section five reports union strategies, section six
union agendas and section seven international links between unions. Finally we draw some
conclusions, consider the implications and make some recommendations as a basis for
discussion.

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2. Working in a Globalising Steel Industry

The main threat posed by globalisation for trade unions is that intensifying competition
between companies in terms of production costs, especially employment costs, will result in
downward pressure on the basic terms and conditions of workers (Lee, 1996). Where
companies operate production facilities internationally they gain new opportunities to transfer
production (or at least threaten to do so) from less to more profitable or potentially profitable
sites. Companies are also in a stronger position to make direct comparisons between plants
and make plant survival and new investment dependent upon unions accepting certain new
demands, such as restricting wage claims or industrial activity as well as guaranteeing
greater effort and flexibility.

A useful place to begin the analysis therefore is to explore reported recent changes in the
terms and conditions of steelworkers.

Tables 1, 2 and 3 provide an overall assessment of changes in terms and conditions as


seen by union officers within national unions, and at integrated sites and mini-mills over the
previous five years. The most positive developments identified by all three groups are the
widespread reports of increased training and skills that have taken place. Additionally, there
appears to be no widespread attack upon certain aspects of terms and conditions such as
holiday and pension provisions. On the other hand, the most negative changes include the
high proportions recording increases in workloads, the amount of subcontracting,
redundancies, job insecurity and to a lesser extent job dissatisfaction.

Table 1 The changing experience of work reported by national unions over


the previous 5 years (percentages)
Increased Same Decreased
Work loads 83 11 6
Subcontracting of jobs 73 19 8
Skills levels 70 27 3
Training 43 38 19
Number of redundancies 46 31 23
Earning power 30 38 32
Pension provision 28 66 6
Accidents 31 30 39
Occupational illness 25 44 31
Job satisfaction 22 40 38
Hours of work 19 65 16
Job security 14 35 51
Holidays 8 92 0

Source: IMF/Nottingham & Cardiff University Survey

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Table 2 The changing experience of work in 92 integrated sites
(percentage reporting)
Increased Same Decreased
% % %
Work loads 77 14 9
Skills levels 67 27 6
Training 63 29 8
Subcontracting of jobs 50 37 14
Earning power 46 28 26
Number of redundancies 40 31 29
Accidents 29 16 55
Occupational illness 23 39 38
Job security 25 42 33
Pension provision 22 64 14
Hours of work 21 65 14
Job satisfaction 17 47 36
Holidays 13 84 3

Source: IMF/Nottingham & Cardiff University Survey

Table 3 The changing experience of work in 48 mini-mills (percentage reporting)


Increased Same Decreased
Skills levels 52 44 4
Work loads 51 19 28
Training 49 38 13
Earning power 46 25 29
Subcontracting of jobs 41 38 21
Job security 38 29 33
Hours of work 35 40 25
Ac cidents 30 40 30
Number of redundancies 27 34 39
Occupational illness 23 63 15
Pension provision 21 42 37
Job satisfaction 15 61 24
Holidays 13 85 2

Source: IMF/Nottingham & Cardiff University Survey

Comparing integrated sites with mini-mills reveals that a number of developments are
common to both (for example, reported increases in workload, skill levels and training
provision) though a number of developments are more widely reported at integrated sites.
Further, certain improvements noted in integrated plants - such as the significant proportions
recording declines in accidents and to a lesser extent occupational illness - are far less
evident in mini-mills. Those responding from mini-mills were also more likely to record
deteriorating pension provisions.

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To explore whether there were any obvious features associated with those plants reporting
changing terms and conditions, two 'extreme' groups were created, the first containing those
plants reporting most improvements in terms and conditions and the second the plants
reporting least overall improvement or a deterioration (Table 4).

Table 4 Integrated steel plants reporting most and least improvements to terms
and conditions

Most improvements Least improvements


Company Country Company Country
or Plant or Plant
Elfouladh Tunisia BHP Australia
SSAB Sweden Hoogovens Netherlands
Outokumpu Finland Izmir Demir Turkey
Siderar Argentina Targovista Romania
Siderca Argentina Uddeholm Sweden
TKS Thyssen Krupp Germany Acerias Colombia
Dunkerque Sollac France Acesita Brazil
Louviere Hoogovens Belgium Acindar Argentina
ZDB Czech Republic Sollac France
Jakl Karvina Czech Republic ISPAT India
Zelezarny Czech Republic Rourkela India
BHP Australia

A striking feature of these groups is that some companies (BHP, Hoogovens, Sollac) and
some countries (Australia, Sweden, France, Argentina) appear in both groups. This may
reflect important aspects of globalisation previously noted in other sectors - that in terms of
protection of steelworkers’ earnings, national steel markets provide a weakening defence and
ownership by a particular company, no matter how profitable, may not protect the terms and
conditions of workers in particular plants within that company. To provide one extreme
example, the BHP plants that feature in both lists were part of the same complex at Port
Kembla.

However, there does appear to be some protection afforded by geographical region. East
Asian steelworks, for example, perhaps due to the profitable East Asian steel market (at least
up until the economic crisis of recent times), do not feature on either list, suggesting that terms
and conditions have been reasonably stable. It is also notable that terms and conditions in
certain countries rapidly entering the global steel market-place (such as the Czech Republic
and Argentina) are present in the most improved group.

One effect of these changes in terms and conditions has been that many national unions have
been, and continue to be in conflict with employers over certain issues. For example, more

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conflict than co-operation was recorded over issues of redundancies, job protection, and
workloads, together with earnings and (where applicable) minimum wage levels. Significantly,
however, and in contrast to other industries affected by globalisation (for example the airline
industry, see Blyton et al, 1998) many basic terms and conditions in the iron and steel industry
have not deteriorated and as a consequence unions and management still appear to co-
operate closely on a range of issues. For example, as Table 5 shows, national unions were
much more likely to report co-operation than conflict over such issues as quality improvement,
new technology and training. In sum, a significant degree of consensus continues to surround
a number of basic terms and conditions and work-related issues in the steel industry.

Table 5 Areas of co-operation and conflict between national steel unions


and employers (percentages reporting)
Mainly Equal Co-operation Mainly Conflict
Co-operate and Conflict
Quality improvement 83 17 0
New technology 71 23 6
Investment 65 20 15
Training 62 27 11
Company performance 61 31 8
Holidays 56 39 5
Health and Safety 56 33 11
Working practices 49 37 14
Pensions 45 34 21
Hours of work 36 33 31
Work loads 31 23 46
Minimum wage 27 32 41
Earnings 22 32 46
Job protection 19 42 39
Redundancies 16 30 54

Source: IMF/Nottingham & Cardiff University Survey

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3. Ownership & Ownership Change

A prominent feature of globalisation in the steel industry is the changing ownership of steel
facilities. This can take various forms such as privatisation, acquisition, merger, or the
creation of joint ventures. The changes also involve a reduction in the domestic ownership of
the steel industry and the (albeit gradual) rise of international steel companies. Traditionally,
steel companies did not invest heavily overseas nor relocate in large numbers to low-wage
locations. Such moves were deterred by widespread state ownership, high transportation
costs and the enormous sunk capital costs involved that made it difficult to exit from existing
operations (Aylen, 1988).

However, technological changes are making steel a less capital-intensive industry and are
accelerating the pace of geographical and structural change. Reductions in trade barriers,
such as the creation of the European Single Market, are further stimulating cross-national
ventures. Steel-makers are likely eventually to reflect the approach of the motor industry with a
reduced number of manufacturing groups and with production organised on a world-wide
scale. Already, steel companies are pursuing innovative trans-national mergers and alliances,
aggressive purchasing, and increased overseas investment to create a less nationally-based
steel industry. The pace of these trends should not be exaggerated, however. The steel
industry is not yet truly global. Until the recent case of ISPAT, there were no significant steel
companies operating fully on a multi-national basis, with national steel companies continuing
to largely dominate and supply home markets (Bacon and Blyton, 1996). Nevertheless, the
strategies being adopted by leading steel companies are acting to reduce the traditional role
and influence of national governments and the responsibilities felt by steel companies
towards traditional steel areas. The implications of these developments are central to trade
union responses to globalisation.

These developments raise two vital questions:

• how much does the pattern of ownership really matter for those working in the industry? 1

• if the nature of ownership does matter, what are the effects of ownership change?

The survey provides useful insight into these questions. Not only was a range of ownership
patterns well represented, but also more than three out of every five plants (62%) reported a
change in ownership during the previous fifteen years.

1 Here we are using the term ‘ownership’ to explore formal links between companies according to country of
origin and between companies and government. We do not explore the pattern of share ownership within
companies and point out that this could be increasingly important where a majority of shares are owned
outside the country in which a company is mainly based.

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Does Ownership Matter?

If ownership matters it should be possible to detect different trends in steel plants according to
their ownership. Among the sample of integrated plants:
• 16% were state-owned
• 47% were privately owned by one domestic company
• 15% were privately owned by one overseas company
• 5% were privately owned not quoted
• 17% were part state and part privately owned
• 10% were joint ventures between domestic companies
• 14% were joint ventures between domestic and overseas companies
• 2% were joint venture between overseas companies

NOTE: the percentages sum to more than 100 as a proportion fitted into more than one
category.

Making a simple assessment by comparing the extent to which terms and conditions had
improved or deteriorated under different ownership conditions suggests no marked variation
due to ownership (Table 6). Four common trends were most prominent, with a significant
majority of plants in each ownership category reporting inc2eases occurring in: training, skills,
workloads and the amount of subcontracting. From this evidence, it appears no longer the
case, therefore that state ownership provides any particular benefit to terms and conditions
that is not equally likely to be found (or be absent) under other ownership conditions. It should
also be appreciated that many of the changes in employment levels, the use of contractors
and working practices occur as a prelude to privatisation, thus making the company ripe for
privatisation, by reducing the costs and future liabilities for the future owners. The attitudes of
trade unions to public ownership are reported later in this report (see Table 16)

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Table 6 Percentage of integrated sites reporting changes to terms and conditions over the previous five years, by ownership
State Nationall Overseas State/ Joint Joint venture
Owned y Owned (14) Private venture domestic/ overseas
(15) Owned (16) domestic cos. (13)
(43) cos.(9
Earning power Increased 50 53 36 40 67 39
Decreased 50 19 27 27 22 23
Hours of work Increased 7 21 30 25 25 8
Decreased 14 19 30 13 0 15
Holidays Increased 7 14 27 6 11 0
Decreased 0 5 18 0 0 15
Accidents Increased 50 21 46 44 22 0
Decreased 36 67 36 31 67 85
Occupational illness Increased 43 29 0 20 11 8
Decreased 29 33 36 27 56 62
Training Increased 64 56 73 69 44 69
Decreased 14 9 0 0 0 8
Pension provision Increased 14 32 18 20 33 18
Decreased 14 14 9 13 11 9
Redundancies Increased 23 51 27 29 56 23
Decreased 39 29 18 29 22 54
Job security Increased 31 23 27 6 11 23
Decreased 15 47 36 20 44 31
Skill levels Increased 43 67 91 50 56 83
Decreased 0 12 0 0 11 0
Work loads Increased 46 88 73 60 67 85
Decreased 8 7 18 13 22 8
Job satisfaction Increased 29 14 18 13 11 8
Decreased 29 42 36 20 22 31
Subcontracting Increased 36 61 36 27 44 46
Decreased 14 14 18 20 33 15

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The Impact of Privatisation

The reduced benefits of state ownership in protecting employee terms and conditions have
occurred alongside the privatisation of much of the world steel industry in recent years.
Privatisation reduces both the political regulation of steel and the national nature of steel
companies, and is therefore a key force of globalisation. By introducing a stronger profit
motive, privatisation also encourages management to pursue more actively those strategies -
including paying increased attention to international industry opportunities - to maximise
profits. State-owned companies owned one quarter of world crude steel capacity in 1986; by
1995 this had shrunk to 15% and has fallen further since that date. Privatisation has been
particularly prevalent in Latin America, Western and Eastern Europe. The public sector share
in developing countries fell from two-thirds in 1986 to 45% in 1995. In Latin America, for
example, 95% of steelworks were privatised since 1990. Such dramatic changes might be
expected to have a significant impact upon steel unions and their members as state
subsidies for the protection of terms and conditions are removed.

There is strong evidence that in the eyes of the national unions taking part in the study,
privatisation (and the process leading up to privatisation) decreases the number of jobs,
threatens pension provision, reduces job security, increases workloads, leads to fewer steel
plants and diminishes the role and influence of trade unions (Table 7). Privatisation was also
seen to be widely associated with companies opening plants overseas (thereby driving further
internationalisation) and increased plant investment. To a lesser extent, privatisation was also
linked (by around 2 in 5 national unions) to increased training; however, the sample was fairly
evenly divided on the effect of privatisation on employee earnings.

Table 7 The effects of privatisation reported by national steel unions


(percentages reporting)
Increased Stayed the Same Decreased
Work loads 68 20 12
Investment in plant 58 38 4
Companies opening overseas plants 48 52 0
Education and training 39 50 11
Employee earnings 31 42 27
Pension provision 19 66 55
Employment security 11 50 39
Role and influence of trade unions 8 48 44
Number of plants 8 36 56
Number of jobs 12 8 80
Source: IMF/Nottingham & Cardiff University Survey

A view from the workplace is provided by the fact that the sample of integrated plants included
over a third that had been privatised during the previous fifteen years. These plants were
more likely to also report workforce reductions and increased redundancies compared to the

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sample of integrated sites overall. In addition, more privatised sites reported managers had
linked pay to company profitability and quality targets. However, privatisation was not all bad
news for trade unions in those plants that survived closure. A large majority of union
representatives in privatised plants reported managers still regarded agreements reached
with unions as important, and privatised companies are more likely to have a workers’
representative on the Board of Directors of the company; together these suggest that public
ownership bestows a pro-union legacy that survives privatisation. However, this may be
changing as a greater proportion of privatised plants reported the threat of union de-
recognition and attempts to reduce the role of unions in health and safety, compared to the
plants with different ownership patterns (Table 8).

Privatisation in general is also associated with attempts to de-politicise the steel industry and
remove or reduce governmental restrictions on the operation of the steel market and steel
companies. Consequently, in the light of continued privatisation it might be expected that the
influence of steel trade unions on government would have been reduced. However, in general
this does not appear to have been the case. Responses from national unions indicate little
difference overall compared to five years previously in the degree of union political influence
on government: a majority indicated influence had stayed the same with national, regional and
international governments and this appeared unaffected by privatisation. This could reflect the
election of a number of ‘left-of centre’ governments in the last few years.

Acquisitions and Joint Ventures


As noted above, during the previous fifteen years a majority (more than three-fifths) of
integrated sites in the sample had changed the nature of their ownership. In addition to
privatisation, a further one in five had been acquired by another company, one in eight moved
from private ownership to become shareholder-owned, and one in twelve became a joint
venture. We now turn to consider what the implications are of a change in ownership for terms
and conditions and for workplace industrial relations.
Information from integrated plants indicates 6 out of 13 areas of terms and conditions
remained broadly unaffected by ownership change (Table 6). Comparing those plants that
had changed ownership with those that had not reveals similar proportions experiencing both
three positive changes - increased training and skill levels, and decreased accidents - and
three negative changes - increased workloads and subcontracting, and decreased job
satisfaction. Compared to plants experiencing no change in ownership, any change in
ownership made the following more likely: increased redundancies, but also increased
earnings and decreases in reported occupational illness.
Overall, the information provided by integrated plants on changes to terms and conditions
reveals a significant finding - that any change in ownership appears to bring about certain
improvements to terms and conditions. Overall, the plants with more negative than positive
changes in terms and conditions were more likely to be those that had experienced no
change in ownership. This is also the case for privatised plants that have survived closure,
despite the disadvantages of privatisation reported by national union officers above.
However, this varied to some extent according to issue. On the issue of training, for example,
steel plants that had not changed ownership were more likely to report widespread training
and training budgets (Table 8). Additionally, unions overall appeared to fare better with no
change in ownership. Plants with change in ownership reported less union involvement in
strategic company decisions and the threat of union de-recognition was higher (Table 9).

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Table 8 Industrial relations and training in integrated sites by change of
ownership (Percentage reporting)
Privatised Became a Joint Acquired No
Floated Venture Change

Unions involved strategically 47% 21% 12% 29% 58%


at plant level

Worker representatives 64% 17% 12% 35% 32%


On main board

Attempts to reduce role of 30% 25% 17% 29% 19%


unions in health & safety

Threat of union 59% 50% 50% 44% 29%


De-recognition a problem

Change depends on 35% 55% 57% 50% 50%


agreement

Unions trust management 48% 42% 43% 50% 49%

Designated training budgets 49% 14% 7% 10% 72%

Extensive on the job training 44% 15% 8% 17% 50%

Management value 72% 67% 86% 63% 58%


employees

Table 9 A summary of the implications for industrial relations and terms


and conditions of any change in ownership

Industrial relations threat to trade unions


• Less union involvement in strategic company decisions at company level
• Less union involvement in strategic company decisions at plant level
• More attempts to reduce union
• role in health and safety
• Greater threat of union de-recognition
• Less input from employees
• Lower morale
• More union involvement in works councils at plant level
• More use of employee newsletters
Terms and conditions changes
• Increased earnings
• Decreased holidays
• Decreased occupational illness
• Decreased accidents
• Fewer designated training budgets
• Less extensive on the job training
• Greater employment of part-time workers
• Less pay connected to profit or quality

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Table 10 Changes to terms and conditions in integrated sites by ownership change (percentage reporting)
Privatised F loated Became a joint Acquired No change
venture
Earning power Increased 55 58 57 44 38
Decreased 19 17 43 28 38
Hours of work Increased 17 0 17 29 20
Decreased 13 9 34 18 14
Holidays Increased 16 8 14 11 17
Decreased 3 8 14 11 0
Accidents Increased 26 25 0 22 37
Decreased 55 50 57 56 46
Occupational illness Increased 23 17 0 6 27
Decreased 48 58 71 39 27
Training Increased 71 25 43 44 57
Decreased 10 0 14 11 9
Pension provision Increased 31 27 29 22 13
Decreased 14 9 29 11 19
Redundancies Increased 52 50 43 33 35
Decreased 17 25 14 11 38
Job security Increased 33 17 14 22 21
Decreased 27 25 28 33 35
Skill levels Increased 74 50 71 61 57
Decreased 7 8 14 6 11
Work loads Increased 77 58 57 67 74
Decreased 13 25 14 17 11
Job satisfaction Increased 13 25 0 17 17
Decreased 45 33 57 44 34
Subcontracting Increased 45 25 29 39 66
Decreased 24 17 14 17 9

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Foreign Ownership in Steel Companies

The declining proportion of plants owned by domestic companies is a key feature of


globalisation in the steel industry. National unions were asked to indicate the effects of foreign
ownership of steel companies in their country. Table 11 reveals that foreign ownership was
more likely to be associated with absence of union recognition, inferior basic terms and
conditions, higher workloads, less job guarantees, greater use of temporary employees and
contractors. Yet at the same time foreign-owned companies were also more likely to operate
innovative work organisation policies, involve employees in quality improvement, provide
good training and improve skill levels. Overall then, foreign ownership of steel companies
appears to be an important factor in threatening to reduce terms and conditions while
simultaneously diffusing new working practices.

Table 11 National union views on sites with foreign investment compared to


domestically owned sites (percentage reporting)
More likely Same Less likely

Use more contractors 48 47 5

Introduce innovative working practices 53 42 5

Use more temporary employees 48 47 5


Involve employees in quality improvement 40 60 0

Provide good training 35 55 10

Improve skill levels 37 47 16

Provide good terms and conditions 14 53 33

Establish a partnership with unions 11 26 63

Limit redundancies 5 57 38

Provide good pensions 0 72 28

Recognise unions 5 59 36

Operate reasonable workloads 10 55 35

Offer job guarantees 0 63 37

Source: IMF/Nottingham & Cardiff University Survey

- 15 -
4. The impact of mini-mills

A further key aspect of globalisation is the rapid spread of new technologies and in the steel
industry this is best represented by the rise of mini-mills. A widely-held belief is that,
compared to integrated plants, mini-mills combine greater workforce flexibility, lower pay
rates, decentralised decision-making and provide a greater opportunity for employers to
establish a non-unionised workforce. Not only are these features of mini-mills of direct
concern to trade unionists representing mini-mill workers but they also threaten to drag down
terms and conditions in integrated sites. The threat to trade unions - that some of these
features will spread beyond the mini-mill sector - is made more likely by the increasing
number of senior executives of steel companies who have gained their formative experience
in non-union mini-mills. For example, by 1989, 47% of the total output of the Italian steel
industry was managed by former mini-mill entrepreneurs. Mini-mill entrepreneurs heading
companies such as Riva and Lucchini have built-up companies to rank amongst the largest
steel producers in the world.

Two key questions were addressed by the survey:

• how do mini-mill employee relations (terms and conditions and industrial relations) differ
from those prevailing in integrated sites?

• what happens to integrated site employee relations when the plant is competing with mini-
mills?

The findings confirm that mini-mills differ from integrated sites in some commonly recognised
features. Yet we failed to find other expected differences. This may be partly accounted for by
the nature of the sample of mini-mills. As the plant level surveys were distributed by the
national unions, the surveys were much more likely to be sent to unionised than non-unionised
mini-mills; in addition, the majority were located in traditional industrial areas and owned by
companies with other steel interests. Thus, they were not typical of the green-field site
developments often reported in the USA (Smith, 1995). However, it was still surprising to find
that compared with integrated sites, mini-mills were no more likely to negotiate terms and
conditions at plant level, and just as likely to have collective agreements covering a range of
issues. Trade union membership density was actually higher overall in unionised mini-mills
than in integrated steel sites. Where unions are recognised a large majority of mini-mills are
also seen to attach importance to agreements with unions, and almost two-thirds attach 'a lot
of importance'. These proportions were similar to those for integrated sites. The climate of
industrial relations was also generally similar to integrated sites, with matched reports of
levels of co-operation and conflict, levels of trust and the value management placed upon
employees (Table 12).

Although work practices are often thought to differ in mini-mills these were also surprisingly
alike to those reported in integrated plants. This is evident, for example, in relation to the
extent to which teamworking was operated and the degree to which managers pursued
employee involvement techniques such as quality circles. Mini-mills were also reported as no

- 16 -
more likely to seek to recruit workers who were less supportive of unionism or who lacked
experience of the steel industry. Given all of these similarities it was not surprising that the
trends in changes to terms and conditions in mini-mills were no different overall to those
reported in integrated sites.

Table 12 A comparison of industrial relations in integrated sites and mini-mills


Integrated sites Mini-mills

Over 75% of employees not in a trade union 40% 3%

Managers attach a lot of importance to agreements with unions


57% 65%
Union agreement necessary for important decisions on working
arrangements 48% 46%

Co-operation rather than conflict typifies union-management


relations 51% 68%

Trust between unions and management 62% 65%

Managers value employees 58% 65%

Source: IMF/Nottingham & Cardiff University Survey

There were other indications, however, that the role of trade unions in mini-mills was in fact
less than in integrated sites. There was less trade union activity overall and union de-
recognition was thought to be a potential problem in the future for a higher number of mini-
mills than integrated plants. In addition, pay systems in mini-mills were markedly more flexible
and linked to performance, although employee share option schemes were less common. On
the issue of training, in all aspects, more training was seen to be occurring at integrated sites
than in mini-mills.

To assess the degree of diffusion of mini-mill employee relations into integrated sites
comparisons were made between integrated sites owned by companies also owning mini-
mills with integrated sites owned by companies with no mini-mills. In the event, however, few
differences emerged between these different types of integrated sites. Terms and conditions
at integrated sites were not particularly affected by whether a company also owned mini-mills
(although job security had shown a greater decrease in those integrated plants whose owners
also owned mini-mills).

- 17 -
5. Work Restructuring

As global integration increases, the search for the most productive working practices
becomes a world-wide phenomenon. In response to unstable market conditions and as a
further attempt to cut costs, many employers have sought increased flexibility in the numbers
of employees they employ, through the use of non-standard contracts. One result is that
across countries at plant level, work contracts appear to be increasingly less secure. In mini-
mills for example, over seven out of ten reported that compared to 5 years ago managers had
introduced more workers on fixed-term contracts (employed for a specified period of time or
where employment is limited to the completion of a particular project or task). Almost two-
thirds of integrated sites also reported an increase. The next most prevalent form of flexibility
was the increased number of contractors, out-workers or agency employees, whilst increases
in part-time employees, casual workers (not usually entitled to paid holiday or sick leave) were
reported less extensively (Table 13). This growth in non-standard contracts, together with
findings reported earlier of perceived reductions in job security and continuing experiences of
redundancy, underlines the overall decline in job security that characterises much of the
industry.

Table 13 Integrated sites and mini-mills reporting increases in flexible contracts


compared to 5 years previously (percentages)
Integrated sites Mini-mills
Workers on fixed term contracts 64% 71%
Number of contractors 56% 69%
Part time employees 19% 36%
Casual workers 9% 19%

Source: IMF/Nottingham & Cardiff University Survey

To assess further the extent to which working practices have been restructured and may be
converging around a model of the flexible firm, a range of ‘high involvement’ or ‘high
performance’ work practices were examined. High involvement work practices are those
designed to increase the flexibility and commitment of employees to their work although they
can also be associated with increased levels of effort and stress. Twelve high involvement
work practices were measured to assess the extent to which these had diffused deeply into
workplaces (taken to be whether these work practices applied to over 50 per cent of the
employees they would affect). Table 14 indicates a very extensive diffusion of these high
involvement work practices, with the majority of the practices now operating in at least half the
responding plants. Moreover, a greater diffusion of these working practices was evident in
integrated sites than in mini-mills. Thus, although mini-mills are often portrayed as leading in
such working practices this does not appear to be the case overall. Consequently,
comparisons with unionised mini-mills are unlikely to be driving the introduction of these
practices. However, it is also possible that because mini-mills are more recent developments

- 18 -
and, by definition, far less labour intensive, that there is far more scope for change in working
practices in the integrated plants.

Table 14 Reported presence of high involvement work practices applied


to over 50 per cent of employees
Percentage Percentage
Work Practice of Integrated Sites of Mini Mills
Responsibility for quality resting with the shop-floor 71 69
Employee job descriptions that are flexible and not 70 61
fixed to one specific task
Smaller unit crews with larger activity ranges 64 43
Foremen or team leaders working in production 66 75
Employees organised into work groups or teams to 60 49
supervise their own work
Maintenance tasks integrated into production jobs 58 48
Employees organised into teams to solve problems 55 54
and discuss performance, sometimes called quality
circles
Employee participation schemes e.g. suggestion 54 34
schemes, newsletters
Production teams including skilled maintenance 53 47
workers
Reduction in the layers of management 53 40
A just in time production system 48 63

Operators involved in decisions regarding major 42 3


changes in process technology or equipment

Source: IMF/Nottingham & Cardiff University Survey

- 19 -
6. Trade Union Strategies

The globalisation of the steel industry is posing a series of important questions for trade
unions, not least leading unions to question the usefulness of many of their traditional policies.
For example, steel unions in many countries have had to rely on national collective bargaining
as the main formula for representing members' interests. In a changing environment, however,
managers often alter their preferences for the most appropriate level of collective bargaining.
Consequently, we have witnessed the emergence of new union policies and strategies, for
example, the spread of workers' representatives on Boards of Directors in the USA (Mangum
and McNabb, 1997). While many of the developments taking place are not in themselves new,
they mark a departure from the traditional industrial relations approach of many unions.

Broadly speaking, we can categorise union strategies pursued in the steel industry into three
types:

• First, the 'traditional' strategies that dominated until the steel crisis of the 1970s, and which
relied on such tactics as strikes and industrial action; public demonstrations and marches,
withdrawal of goodwill and arbitrated settlements with management.
• Second, these policies were over-laid with 'crisis' strategies in response to over-capacity
during the 1970s and 1980s. These included negotiating improved early retirement
packages, improved benefits in the event of plant closures and - under management
pressure - concession bargaining, and negotiating new agreements for more flexible
working practices.
• Third, in the 1990s new 'innovatory' strategies have developed that revise traditional
relationships and priorities. These include: involvement in strategic company policy-
making, closer links with other unions including overseas, support for employee
involvement in the work process and new bargaining issues.
Evidence from the survey reveals considerable innovation in union tactics at all levels (see
Table 15) especially in forging new relationships. For example, clear majorities of unions
have engaged in joining managers in strategic discussions at plant and company levels,
adopted different bargaining issues, become more proactive and less reactive to
management policy and increasingly have employee and union representatives on company
boards. Furthermore, a majority of unions report building closer links with other unions and
over half (57%) are reaching longer-term bargaining agreements, once again policies mainly
promoted by management rather than the unions.

One area where trade unions have been less willing to change, however, has been re-
ordering policies to save jobs, with a majority (approximately two in three national unions)
reporting that they have not traded pay for job security or reduced working hours to save jobs.
Instead unions have continued to negotiate improved early retirement packages and
negotiate improved benefits in the event of plant closure. Alongside these new issues the
majority of unions have continued to be involved periodically in strikes or other forms of
industrial action and public demonstrations or marches.

- 20 -
Table 15 Trade union strategies pursued during last 5 years (percentages)
National Unions Unions in Unions in Mini-
Integrated mills
Plants

'Traditional Tactics'

Public demonstrations / marches 77 73 56

Strike or industrial action 66 69 59

Compulsory arbitration 46 38 24

Withdrawal of goodwill 34 23 22

'Crisis Tactics'

Negotiating improved early retirement 57 57 54


packages

Negotiating new agreements for more flexible 57 56 55


manning practices

Negotiating improved benefits in event of 49 39 29


plant closure

Concession bargaining 31 30 32

'Innovative Tactics'

Building closer links with other unions 83 81 60

Joining managers in strategic discussions at 66 64 50


company level

Joining managers in strategic discussions at 69 72 55


plant level

Adopting different bargaining issues 66 67 74

Becoming more proactive and less reactive 66 62 58


to management policy

Longer term bargaining agreements 57 58 67

Broader-based campaigns on bargaining 54 56 64


issues

Encouraging employee involvement in 54 56 43


management decisions

Employee and union representatives on 51 N/A N/A


company boards

Payment for skills not output of production 40 61 44


workers

Reducing working hours to save jobs 37 23 33

Trading pay for job security 34 14 33

Source: IMF/Nottingham & Cardiff University Survey

- 21 -
7. The Main Issues: A Common Union Agenda?

The IMF seeks to promote a common approach that represents the interests of all its
members. Consequently, in the survey we explored several key questions:

• Do steelworkers face similar current and future problems?

• Are there common bargaining priorities?

• Is there policy agreement between unions?

Key Issues Now and Over the Next 5 Years

To gather information on developing trends, national unions were asked to assess the extent
to which various issues were currently a problem or were likely to become problems for
them over the next five years. We discovered a general consensus on the main problems.

The main problems currently faced (in order of importance) were:


• the increased use of contractors
• low job security
• increased work pace
In relation to the next five years the main problems identified, in order, were:
• cyclical downturn in demand
• new technology other than mini-mills
• imports of steel
• plant closures
• steel company mergers
• increased work pace
• the use of contractors
• divestment by companies
• low job security
The issues that did not appear currently to be widespread problems nor problems in the next
five years included union de-recognition, reductions in holidays, privatisation (with much
already completed) and influence from mini-mills.

Several remaining issues appeared to be current or emerging problems for certain unions but
not for others. These included: reductions in earnings; increased hours of work; poor health
and safety provision; divestment by companies and level of training provision.

- 22 -
Bargaining Priorities

A further indication that common issues are currently being faced by all or a majority of IMF
affiliates is the similarity in the bargaining priorities reported by unions. These bargaining
priorities fell into three groups. Overall, bargaining agendas appear dominated by issues
relating to earnings (a high priority for 77 per cent), health and safety (also rated a high priority
by 77 per cent) and job protection (74 per cent). A second group of priorities centred on
redundancies (rated a 'high priority' by 66 per cent), hours of work (rated a 'high priority' by 57
per cent), working practices (54 per cent) and workloads (46 per cent). A third group of issues
were of importance for certain affiliates more than for others, and these included training,
pensions, skill levels and holidays.

Despite the widespread similarities over current bargaining agendas, no common pattern
was evident in the bargaining priorities unions expected to become more important over the
next five years. Only the increased importance attached to hours of work issues (rated 'will
become more important' by 66 per cent of unions) appeared as a common theme in future
bargaining priorities.

Union Policies

Union policies on several important issues appear to be quite similar. For example, a large
majority of national unions indicated support for the introduction of new technology, union
representatives on Boards of Directors, international Works Councils, and new forms of work
organisation (Table 16). More opposition than support was expressed by unions towards
foreign ownership of steel companies in their own country, though the majority were 'neutral'
on this issue. On several issues no common view emerged, for example in relation to
overseas investment by domestic steel companies, trade restrictions on steel and
steelworkers owning shares in their companies.

Table 16 National union policies (percentages reporting)


Support Neutral Oppose No policy
New technology 84 16 0 0
International works councils 79 11 0 10
Union representatives on Boards of 76 8 5 11
Directors
New forms of work organisation 74 16 5 5
Steelworkers owning shares in their 40 4 5 21
companies
State ownership of steel companies 40 34 13 13
Trade restrictions on steel 31 31 31 7
Overseas investment by steel 22 41 32 5
companies in your country
Foreign ownership of steel 5 58 29 8
companies

Source: IMF/Nottingham & Cardiff University Survey

- 23 -
As state aid for restructuring the steel industry has been a major international issue
particularly in Europe and North America, detailed questions were asked on union policy
towards state aid. Widespread support was expressed for state aid to help regional
development, assist redundant steelworkers and for technical modernisation. A majority also
supported state aid for rationalising existing plants. Respondents were somewhat more
divided, however, over the issue of state aid to build new plants (Table 17).

Table 17 National union policy on state aid (percentages reporting)

Support Neutral Oppose No policy

Help redundant steelworkers 91 3 3 3

Help regional development 88 6 0 6

Technical modernisation 79 12 6 3

Rationalise existing plants 60 14 17 9

Build new plants 56 12 27 6

Source: IMF/Nottingham & Cardiff University Survey

- 24 -
8. International Links Between Unions

Extent of Links

The similarities identified regarding current experiences, future problems, union tactics,
bargaining priorities and the level of policy agreement all point to the potential for closer
international collaboration between steel unions. Steel unions are well placed to increase the
extent to which they organise more on a global scale through closer international
collaboration, in order to mirror the increasingly global operations of capital.

We enquired into the current level of international links at national and plant level. Links
between trade unions take place mainly at the national trade union level, rather than plant
level. Whilst there was some knowledge about other plants at the plant level, very few regular
links between similar plants had been established (Table 18). This was also broadly true of
national unions with the exception of Western Europe where regular links were much more in
evidence (Table 19). This may be due to the co-ordinating role of the EMF at the European
Union level, the ECSC Consultative Committee and other EU institutions such as the ‘Mixed
Committee’.

Table 18 Plant level links to other similar steelworks (percentages reporting).


Integrated plants Mini-mills

Could name similar plants in other countries 72% 54%


Have some information about those plants 49% 45%
Regular links with unions in those plants 10% 14%

Source: IMF/Nottingham & Cardiff University Survey

Table 19 National links with steel unions in various parts of the world
(percentages reporting)
Regular Occasional No links

Western Europe 60 15 15
Scandinavia 34 29 29
South America 23 29 37
Eastern Europe 20 40 31
North America 14 46 34
Asia 14 26 54
Africa 11 20 63
Asia Pacific 11 9 71
Middle East 6 17 71
Central America 3 29 60

Source: IMF/Nottingham & Cardiff University Survey

- 25 -
Priorities for Co-operation

National unions were asked to identify those issues they felt most required international co-
operation. On seven issues, international co-operation was considered 'very important' by a
majority of the unions. These issues were (in order of priority):
• trade union rights
• environmental issues
• job protection
• health and safety
• multi-national steel companies
• social dumping
• new technology
Issues over which international co-operation were considered less of a priority included state
subsidies, international trade and multi-lateral steel agreements. This situation may have
changed since the time of the survey as a result of the recent crisis and the anti-dumping
activities in the US and elsewhere. At the time of the survey many unions identified benefits
associated with closer links to other unions (Table 20). Interestingly, most of these could be
gained at relatively low cost.

Table 20 The benefits from closer links with steel unions in other countries
(percentage reporting)

Share information 94%


Benchmark terms and conditions 91%
Support for union action 89%
Learn expertise 86%
Create a more powerful political lobby 66%
Redress power of steel companies 51%
Financial support 26%
Protection for domestic steel market 26%
Source: IMF/Nottingham & Cardiff University Survey

Building Co-operation

National unions identified three main obstacles to closer international co-operation (Table
21). Almost half (49%) identified both language barriers and a poor communications network
as major problems, with slightly fewer (43%) indicating that not knowing who to contact was a
major barrier.

National unions indicated that their preferred role for the IMF varied according to the issue.
The most active role of co-ordinating trade unions activities was preferred in dealing with
multi-national steel companies. Over one-third also identified the value of a co-ordinating role
over the issues of pay and benefits, and trade union rights. On other issues, such as job
protection, international trade and state subsidies, the IMF’s optimum role was seen more in

- 26 -
terms of its power to lobby on behalf of all steel unions. In areas such as health and safety and
new technology, the IMF’s main role was seen more in terms of education and providing
information.

What is clear from these results is that the vast majority of unions saw the importance of the
IMF’s role in the future protection and development of steelworker interests around the world.

Table 21 National union views on the role the IMF should play in future
international co-operation.
Co-ordinating To lobby on Mainly No role
trade union behalf of all information&
activities steel unions education
Multi-national steel 54% 38% 8% -
companies
Pay and benefits 39% 34% 27% -
Trade union rights 35% 43% 22% -
Environmental issues 31% 31% 38% -
Health and safety 27% 23% 50% -
Job protection 24% 52% 20% 4%
International trade 19% 50% 27% 4%
New technology 15% 15% 65% 5%
State subsidies 12% 44% 24% 20%

Source: IMF/Nottingham & Cardiff University Survey

- 27 -
9. Conclusions and Recommendations

Conclusions

The main conclusions of this report are as follows:

• Three issues continue to confront unions in an increasingly globalised steel sector: job
security, the rise in insecure contracts and increased workloads.

• These issues constitute the major sources of conflict; at the same time management and
unions continue overall to co-operate closely to seek solutions to current problems.

• These main trends appear unaffected by changes in ownership.

• Beyond these issues, any changes in ownership generally appear to bring about some
improvements in other terms and conditions but reduce union influence.

• However, privatisation in particular leads to decreases in the number of jobs, can threaten
pension provision, reduces job security, increases workloads, leads to fewer steel plants
and diminishes the role and influence of trade unions.

• Privatisation was also seen to be widely associated with companies opening plants
overseas (thereby driving further internationalisation) and increased plant investment.

• In many previously government-owned plants that were not closed during privatisation a
pro-union legacy endured although at the same time, privatisation often involved a
reduced role for unions overall and unions in privatised plants reported greater concern
over future management attempts to reduce union influence.

• Foreign investment in steel sites brings more innovations in workforce flexibility, training
and skills. However, foreign-owned sites appear to be less favourably predisposed to
trade unions.

• Industrial relations, working practices and changes to terms and conditions in unionised
mini-mills were similar to integrated steel sites. Although mini-mills use more flexible
labour contracts they fall behind integrated sites in their use of other forms of flexible
working (e.g. multi-skilling).

• Overall, many employers have sought increased flexibility in the numbers of employees
through the use of non-standard contracts.

- 28 -
• Evidence of changes in working practices was widepread, and indicated the extent to
which the steel sector has adopted ‘high involvement’ or ‘high performance’ work
practices in recent years.

• Evidence from the survey reveals considerable innovation in union tactics at all levels.

• The main issues identified by unions in the next five years included: cyclical downturns in
demand; new technology; imports of steel; plant closures; steel company mergers;
increased work pace; the use of contractors; divestment by companies and low job
security.

• IMF affiliates identified very similar bargaining priorities, widespread policy agreement
and a consensus on the need for closer international collaboration.

• The major issues to tackle to gain closer international collaboration included: language
barriers; an inadequate communications network and not knowing whom to contact.

• Affiliates desired an active role for the IMF, co-ordinating trade union activities, lobbying
on behalf of unions and providing information and education.

Towards the start of this report we suggested considering the agenda for trade unions through
a series of questions and we are now in a position to provide answers to some of these. The
survey findings indicate that steelworkers are facing remarkably similar developments but
these are only partly a direct result of globalisation. It would appear that many of the changes
that managers are currently pursuing are not a direct consequence of globalisation, but rather
the continuation of a traditional search for increased productivity. We reach this conclusion
because neither ownership, ownership change, mini-mill technology, or ownership of
integrated sites with mini-mills are affecting changes to terms and conditions.

How should trade unions respond to secure the best deal possible for members? Many of the
traditional methods used by trade unions to influence employers are made less relevant by
globalisation. Most notably, relying on the ownership of steel plants by states and national
companies no longer appears to guarantee secure terms and conditions.

Whilst some observers of the steel industry have identified mini-mills as a major threat to
trade unions, unionised mini-mills were remarkably similar to integrated plants in this study.
This suggests to us that mini-mill technology per se does not require an employee relations
system significantly different to integrated sites and we would attribute non-union mini-mills
more to opportunistic union avoidance.

The similarity of developments reported in this survey by very different plants suggest new
opportunities for shared interests and common action. It also opens up the possibility of pan-
national representation and greater international co-ordination between steel unions. Unions
are showing their innovation potential, not least in aspects of their dealings with management.
This suggests new and important ways to exert influence in a globalising industry. As
companies internationalise, unions need to show a similar ability to work more closely with
other unions on a global basis.

- 29 -
Although globalisation poses significant problems for the working lives of steelworkers, at the
same time it is important to note that in some respects, workers’ terms and conditions have
not suffered adversely. Privatisation has been perhaps the most important factor associated
with negative changes. However, in privatised steel plants as elsewhere, other positive
changes have also occurred including increased skill levels and training provision for those
who retain their employment. Thus, the picture of globalisation inevitably driving a ‘race to the
bottom’ on employment standards, as capital is attracted to the lowest labour cost production
areas, is not strongly borne out in the steel sector.

This picture may change and a race to the bottom may become more important as global
companies begin to emerge, and increase their use of benchmarking. However, this has not
yet occurred, suggesting that unions have a period in which they can co-ordinate activities in
order to either deter, or be better placed to deal with, any downward pressures on basic
terms and conditions.

The international links that already exist among steel unions are likely to require constant work
to deal with a globalised industry. There is little evidence in this survey that differences of
interest form the main barriers to closer international co-operation between unions. It would
therefore appear appropriate to extend the work of the IMF with over 30 IMF World Company
Councils already established bringing together workers in a single company. The levels of
shared interests expressed indicate the extent to which the IMF can continue to foster
approaches that represent the united interests of all members.

Recommendations

Drawing upon the findings of this survey we tentatively offer the following recommendations for
further discussion and development among IMF affiliates:

• Trade unions need to continue to develop innovative strategies with closer inter-union
contact and strategic discussions at different levels.

• As job insecurity is likely to remain widespread, best practice models to equip workers
with appropriate skills for alternative jobs need developing throughout their careers rather
than included only as crisis measures when job losses are imminent.

• Due to the increasing use of insecure contracts unions, affiliates need to consider best
practices for including such workers in training and skill enhancement.

• To protect the ‘losers’ from restructuring it remains necessary to continue with existing
attempts to phase in retirement, provide additional employment and allow older workers to
pass on their skills.

Strategies need to be devised to benchmark the levels of training and skills of foreign-
owned companies and encourage domestic companies to match these. Leverage needs
applying in companies that work with unions in their home countries and yet are less
predisposed to trade unions when operating overseas. Where companies refuse to
recognise unions, 'coercive comparisons' of terms and conditions can highlight the costs
to employees of non-unionism.

- 30 -
Best practice examples of how to deal with major issues (for example, job security, insecure
contracts and increased workloads) are useful for all steel unions notwithstanding national
differences. They need to be recorded, evaluated and effectively publicised to increase the
range of available options to unions (see for example Otto and Wachter, 1996).

• How can workers in non-union mini-mills be recruited into unions? What services do they
require or value?

• Obstacles to closer international collaboration need to be addressed. Initial first steps


could be to publish a compendium of key union contacts in each country by company
detailing their core skills and expertise. This is in tune with IMF World Company Councils.
Affiliates could informally agree contracts whereby individual contacts will respond
positively and in full to any requests for help and advice.

• The extent of policy agreement indicates the scope for unions to campaign on a global
stage with an agreed policy platform, sharing techniques for securing campaign aims.

• To encourage international co-operation between plants we suggest the further


development of the data-base already established by the IMF for major multi-national
companies which groups or pairs together plants that managers compare for
benchmarking purposes. The appropriate union contacts should be identified and
circulated to comparative plants. A full exchange of contracts and agreements should
ensue with a view to benchmarking key terms and conditions from the union perspective.
Eventually, closer collaboration could develop into a co-ordinated bargaining approach
across similar plants.

• To facilitate and encourage such contacts IMF affiliates should identify, encourage and
then publicise this approach in chosen key sites in the first instance. It may be helpful to
begin with sites owned by the same company. Although it is difficult to encourage the
identification of shared interests, this survey indicates that IMF affiliates have very similar
bargaining priorities, widespread policy agreement and a consensus on the need for
closer international collaboration.

• The IMF should take a lead in co-ordinating contacts between the plants as multi-national
steel companies emerge.

• The issue of language barriers needs addressing. Several possibilities could be explored.
First, an audit could be conducted of language skills among national union offices. This
should identify foreign language speakers who could serve as first points of contact
between national unions. Where particular shortfalls are identified national unions should
recruit or develop the language skills of national office staff. Language training could also
be provided for plant officials. Second, we welcome the establishment of private internet
discussion groups through the IMF ‘homepage’ to enable affiliates to share information
and discuss common problems. This may require some translation facilities through the
IMF. The purpose of such groups is to develop a regular exchange of information that
overcomes geographical and time differences.

- 31 -
Annex 1 National unions included in survey
Union Country Membership in steel
industry

Japan Federation of SteelWorkers' Unions (Tekko Roren) Japan 164,461

United Steelworkers of America (USWA) USA 110,000


(Os Kovo) Metalworkers’ Federation Czech Republic 66,661
Steel Metal & Engineering Workers Federation of India India 60,000
(SMEWFI)
Confederacao Nacional dos Metalurgicos (CNMCUT) Brazil 43,000
United Steelworkers of America (USWACDN) Canada 20,000
IMF-ROCC Taiwan 25,000
Federatia Nationale Sindicala Metarom (FNS-M) Romania 22,000
FIOM CGIL Italy 22,000
FIM-CISL Italy 19,000
Ozcelik- Is (Iron and Steel Mettallic Products and Auto
Industry Workers' Union Turkey 15,880
Svenska Metall Sweden 15,000
Verband der Ung. Metallgew (VASAS) Hungary 11,922
Union Obrera Metalurgica (UOM) Argentina 11,000
Gewerkschaft Metall-Bergbeu-Energie (GMBE) Austria 10,500
MCA-UGT Spain 10,000
Centrale de l’Industrie du Metal de Belgique (CMB) Belgium 9,275
Federacion Minerometalurgica Comisiones Obreras Spain 8,500
Metallarbetareforbundet Finland 6,300
CSC-Metal Belgium 5,500
Union de Trabajadores de Colombia (UTRAMMICOL) Colombia 5,000
FNV-Bondgenoten Netherlands 4,600
ISPAT Mazdoor Panchayat (HMS) India 4,000
Birlesik Metal- Is Turkey 2,500
International Metalworker's Federation Philippines Philippines 2,500
Council
F.G.M.M.-CFDT France 2,500
Australian Manufacturing Workers Union (AMWU) Australia 2,200
FC’FO’M-F.O. France 2,100
Asociacion de Supervisores de la Industria Metalrecanica
de la Republica Argentina (ASIMRA) Argentina 1,350
FETIM Ecuador 1,000
IG Metall Germany 100,000
Union of Malayawata Steel Workers (UMSW) Malaysia 850
Co-Industri Denmark 750
Fellesforbundet (FF) Norway 680
Sindicato le Trab. Siderurgica Medellin S/A Colombia 88
SIMA Portugal
D'elfoulhdh Tunisia

- 32 -
Annex 2 Integrated sites included in survey
Plant Company Country of Plant

Bragado Aceros Bragado Sacif Argentina


Campana Siderca Saic Argentina
Acindar Acindar Argentina
Siderar Planta Ensenada Siderar Saic Argentina
Wihole BHP Australia
Port Kembla BHP Australia
Newcastle BHP Australia
Port Waratah BHP Australia
Mayfield Sankey Australia Pty Ltd Australia
Newcastle Wiremills BHP Australia
Pipe and Structural Products, Newcastle BHP Australia
Mayfield BHP Ropes Australia
Voest Alpine Stahl Linz GmbH Voest Alpine Stahl Linz Austria
Voest-Alpine Stahl Donawitz GmbH Voest-Alpine Stahl AG Austria
Laminoir Du Ruau Lamine's Marchands Belgium
Europeens
la S.A.Fafer Usinor Belgium
Charleroi Cockerill- Sambre Belgium
La Louviere Hoogovens- U.G.B Belgium
NV Sidmar NV Sidmar Belgium
Timmoteo-M6 CIA Acesita Brazil
Hilton Works Stelco Inc Canada
Belencito-Boyaca Acerias Paz del Rio SA Colombia
Valcovny trnb Chomutov a.s. Valcovny trnb Chomutov a.s. Czech Republic
Zelezarny a.s. Chomutov V. T. Diacs Chomutov Czech Republic
Jakl Karvina a.s. Jakl Karvina a.s. Czech Republic
Trinecke Trinecke Zelezarny a.s. Czech Republic
Bohumin ZDB a.s. Czech Republic
Ostrava Nova Hut a.s. Czech Republic
Dunkerque Sollac France
Florange Sollac France
Raahe Steel Rautaruukki Oy Finland
Outokumpu Stainless Steel/ Tornio Outokumpu Group Finland
Dillinger Hütte Dillinger Hütte Germany

- 33 -
Plant Company Country of Plant
TKS-Gisamtbeltiebsratsvors Thyssen-Krupp Stahl AG Germany
Gröditzer Stahlwerke GmbH Groditzer Stahlwerke GmbH Germany
Dunaferr Acelmuvek Kft. Dunaferr Hungary
Jamshedpur Tata Steel India
Rourkela Steel Plant SAIL India
ILVA Taranto ILVA S.p.A. Italy
NKK Fukuyama Works NKK Corporation Japan
Nippon Steel Kimitsu Works Nippon Steel Corporation Japan
Ougrall Malayawata Steel BhD Malaysia
IJmuiden Koninklijke Hoogovens NV Netherlands
Jacinto Iron and Steel Sheets Co. Jacinto Iron and Steel Sheets Philippines
Co.
Paio Pires Siderurgia Serviços Portugal
Aceralia-Gijón Aceria Corporation Spain
Aceraua Corporation S.A. Aceraua Corporacion S.A. Spain
Avilés-Asturias
Avesta Avesta Sheffield Sweden
Torshälla Avesta Sheffield Sweden
Avesta Sandvik Tube (AST) Sweden
SSAB Tunnplat SSAB Sweden
Borlange delon (Valshing o belaggning) SSAB Tunnplat Sweden
Hela SSAB Oxelösund SSAB Sweden
Avesta-Sheffield Precision Strip Kloster Avesta Sheffield Sweden
Hagfors Jornverk Uddeholm Tooling AB Sweden
Fundia Bygg AS Fundia AB Sweden
Smedjebacken Fundia AB Sweden
Söderfors Erasteel Kloster AB Sweden
Sandviken AB Sandvik Steel Sweden
Societé Tunisienne de Siderurgie Elfouladh Bourguiba Tunisia
Asil Celik Asil Celik A.S. Turkey
Kardemir Kardemir A.S. Turkey
Izmir Demir Iskenderun D.C.- A.S Turkey
Resita CSR-SA Resita Rumania
Targoviste COST SA Rumania
Calarasi Siderca SA Rumania
Hunedoara Siderurgica SA Hunedoara Rumania
S.C. Metalurgica SA. Aicid Metalurgica SA Aicid Rumania
Buzau Cord. SA Rumania
Roman Petrotub SA Rumania
Targoviste COST SA Targoviste Rumania
Targoviste Otelinox SA Romania
Llanwern British Steel UK
Scunthorpe British Steel UK
Lackenby British Steel UK
Burns Harbor Indiana Bethlehem Steel Corporation USA

- 34 -
Annex 3 Mini-Mill sites included in survey
Plant Company Country of Plant

Walzwerk und Baustahl-Hattenerzeugung Baustahl Ges m.b.h Austria


Co Steel Lasco Co Steel Canada
Siderurgica Boyaca SA Sideboyaca Colombia
Simesa Siderurgica de Medellin S.A. Colombia
Imatra Steel Works Imatra Steel Finland
Fundia Wire / Koverhar Fundia AB Finland
L'Usine d'Imphy Imphy SA France
Acion Speciaun Ascometal France
Usine L'Ardoise Usine division d'Usinor France
Unimetal Gandrange Unimetal France
Ruhrart Ispat Germany
BSW Badische Stahlwerke Germany
Ispat Hamburger-Stahlwerke GmbH Ispat Germany
Hennigsdorf Riva Germany
Elektrostahlwerke Bous Valloureq & Mannesmann Germany
Freital Sachsische Edelstahlwerke GmbH Germany
Freital
Brandenburger Brandenburger Elektrostahl-werke Germany
GmbH
Stahlwerke Thuringen GmbH Stahlwerke Thuringen GmbH Germany
Georgsmarienhütte Holding GeorgsmarienhutteGmbH. Germany
Cremona ISP Italy
Penang Malayawata Steel Bhd Malaysia
Fundia Bygg AS Fundia AB Norway
Fidelity Steel Binondo Fidelity Steel Manufacturing Inc. Philippines
Getafe Azma SL Spain
Sidenor Planta De Basauri Sidenor SA Spain
Siderurgica Sevillana S. A. Siderurgica Sevillana S. A Spain
Sestao Aceria Compacta de Vizcaya SA Spain
Celsa Compania Espanola de Acero Spain
Laminacion S.L
Vitoria Sidenor SA Spain
Bilbao Nervacero SA Spain
Reimosa Sidenor Spain
Vizcaya A.I.O. SA Spain
Kaohsiung Plant China Steel Corporation Taiwan
Kadicoy Kroman Celik San As Turkey

- 35 -
Plant Company Country of Plant

Izmir Works Cebitas Demir Celik Turkey

Ege Metal Demir Celik Ege Metal Demir, Celik Sanayi ve Turkey
Ticaret AS

Yolbulan. Yolbulan Dis Tic. Ltd. Sti. Turkey

Kurekgiler D.G. San. HD. Kurekgiler D.G. San. HD. Turkey

Boruran Boruran D.G. San. A.S. Turkey

Sim Celic A.S Sim Celic A.S. Turkey

Sir Metal Hassas Dokum San A.S. Sir Metal Hassas Dokum Turkey

Diosgyori Acelmuvek Rt. Lichtbogenofen mit Diosgyori Acelmuvek Rt. Hungary


Festeinlage

Roundwood Bright Bar Aldwarke British Steel UK

Avesta Sheffield Avesta UK

Co Steel Sheerness Co Steel UK

Tremorfa Allied Steel and Wire UK

Sterling Northwestern Steel and Wire USA

- 36 -
References

Arthur, J. (1994) ‘Effects of Human Resource Management Systems on Manufacturing


Performance and Turnover’, Academy of Management Journal, 37: 670-687.

Aylen, J. (1988) 'Privatisation of the British Steel Corporation', Fiscal Studies, 9, 3, pp. 1-25.

Bacon, N., and Blyton, P. (1996) 'Re-casting the Politics of Steel in Europe: The Impact on
Trade Unions', West European Politics, 19, 4, pp. 770-786.

Blyton, P., Martinez Lucio, M., McGurk, J., and Turnbull, P. (1998) Contesting Globalisation:
Airline Restructuring, Labour Flexibility and Trade Union Strategies. London: International
Transport Workers' Federation.

Lee, E. (1996) 'Globalisation and employment: Is anxiety justified?', International Labour


Review, 135, 5, pp. 485-497.

Mangum, G.L., and McNabb, R.S. (1997) The Rise, Fall, and Replacement of Industrywide
Bargaining in the Basic Steel Industry. New York: M.E. Sharpe.

Otto, K.P., and Wachter, H. (1996) 'Saarland Steel: Restructuring and managing redundancy',
in J. Storey (ed.) Blackwell Cases in Human Resource and Change Management, Oxford:
Blackwell, pp. 106-123.

Piore, M. and Sabel, C. (1984) The Second Industrial Divide: Prospects for Prosperity, New
York: Basic Books.

Smith, S.K. (1995) 'Internal co-operation and competitive success- the case of the US steel
mini-mill sector', Cambridge Journal of Economics, 19, 2, pp. 277-304.

Werner Franz, H. (1995) 'Do it right first time- quality as the crucial change agent in the
European steel industries', International Journal of Human Factors in Manufacturing, 5, 2,
pp. 211-24.

- 37 -
PART II

INTRODUCTION ............................................................................................................................41
The World Economy............................................................................................................42
Apparent Steel Consumption............................................................................................44
World Steel Production.......................................................................................................49
Apparent Steel Consumption Per Capita .......................................................................51
Direct Reduced Iron.............................................................................................................52
World Steel Trade .................................................................................................................54
World Steelmaking Capacity..............................................................................................55
Capacity Utilisation..............................................................................................................56
Steel Prices............................................................................................................................56
Employment ..........................................................................................................................59
Productivity............................................................................................................................62

List of Appendices
Appendix 1 Employment in the World Steel Industry............................................................. 69
Appendix 2 World Crude Steel and Pig Iron Production........................................................ 70
Appendix 3 World Crude Steel Production by Process .......................................................... 71
Appendix 4 Crude Steel and Continuous Casting Production ................................................ 72
Appendix 5 Crude Steel and Finished Steel Production........................................................ 73
Appendix 6 Direct Reduced Iron Production 1993-98 ............................................................. 74
Appendix 7 Major Steel Producing Countries........................................................................ 75
Appendix 8 Largest Steel Producing Companies................................................................... 76
Appendix 9 World Apparent Steel Consumption by Region................................................... 77
Appendix 10 Apparent Steel Consumption .............................................................................. 78
Appendix 11 World Steel Production....................................................................................... 79
Appendix 12 World Steel Consumption ................................................................................... 80
Appendix 13 World Steel Production / Exports........................................................................ 81
Appendix 14 Major Importing and Exporting Countries........................................................... 82
Appendix 15 Major Net Exporting and Net Importing Countries............................................... 83
Appendix 16 Steel Production, Employment and Productivity................................................. 84
Appendix 17 Effective Crude Steel Capacity Utilisation........................................................... 85

- 39 -
- 40 -
INTRODUCTION

The steel industry has undergone some momentous changes during the last 100 years, with
production increasing by more than 2,680 per cent, rising from just 28 million tonnes (mt) at
the turn of the century to almost 800 mt

steel production during the twentieth century was almost 3.5% per annum (pa), although the
development of steel consumption has been far from even, and has slowed down appreciably
in the last 30 years or so.

The steel industry has also undergone significant changes in its geographical distribution over
this time. The developing countries in Asia and Latin America have invested in new
steelmaking capacity, as have several countries in the Middle East, in order to meet their
growing needs and reduce their dependency on imports, while the break-up of the Soviet
Union resulted in a dramatic fall in steel consumption and thus production in most Central and
Eastern European countries. Similarly the restructuring process which took place in the
European Union and the USA over the last 30 years, resulted in the closure of a significant
level of steelmaking capacity.

Technological changes have also played a major part in this process, as continuous
production processes dramatically improved productivity, and this course of development is
likely to continue for the foreseeable future.

When the previous IMF World Steel Conference was held in April 1995, the steel industry was
enjoying relatively favourable conditions, with many economists forecasting an extended
period of stable economic growth.

The slump in the world economy in the early 1990's saw crude steel production fall by more
than 60 mt (8.0%) from the record 786 mt achieved in 1989, to 723 mt in 1992. However, the
stimulus provided by the rapid growth of the Asian 'Tiger' economies spread to the older
industrialised countries, resulting in a more even pattern of development that augered well for
the future.

The collapse of the Asian financial market in the summer of 1997 had a profound effect on the
world steel market over the next two years. In a very short space of time the entire Asian
region was transformed from being a net steel importer into a net exporter, and the sudden
availability of an additional 30.0 mt or so of finished steel products, coupled with the
devaluation of the currencies in the countries worst affected by the crises, resulted in a
collapse of steel prices, throwing the world steel market into disarray.

The spread of the financial crisis to Russia, whose steel industry was, like that of many of the
former Soviet bloc countries, heavily dependent on exports to the Asian region, and
subsequently to Brazil, threatened to escalate the crisis into one of global dimensions.

- 41 -
However, it was the massive drop in steel prices, in some cases more than 30% below
previously-established levels, which did the greatest damage, forcing many steelmakers to
cut back production, particularly in some of the older industrialised countries, leading to
temporary layoffs and some permanent closures.

In order to protect their domestic markets from "dumping", that is selling steel below its costs
of production, many anti-dumping cases were initiated in the USA, and quickly spread to
many other countries.

The recovery in steel consumption which began in the second half of 1999 continues to gather
strength, with world steel demand expected to increase by around 20 mt (fsp) (2.9%) this
year, which will result in a new world record of close to 720 mt (fsp), that could in turn result in
crude steel production exceeding 800 mt for the first time.

Without any unforeseen disruption, world steel consumption is forecast to continue to increase
over the next five years, rising by some 44 mt to 763 mt (fsp) by 2005. Hopefully, this should
provide the respite that is needed for the industry to establish the necessary structural
arrangements to effectively regulate steel trade and avoid the necessity of resorting to
unilateral action in the future.

The World Economy

During the mid-1990's the world economy consistently grew at around 3% per annum, fulfilling
the optimistic projections of an extended period of steady growth.

Initially led by the so-called Asian "Tiger" economies, which maintained growth rates into or
near double digits for most of the 1990's, the more cautious industrialised nations, who also
benefited from very low inflation rates, gradually increased their economic performance,
resulting in a much better balance between the developed and developing nations that
augured well for the future.

Growing concern was also being expressed in respect of the need for the widespread
adoption of employment-creating policies, that would begin to reduce the very high levels of
unemployment in many of the industrialised countries and underemployment in developing
countries, - the legacy of almos4 two decades of neo-Liberal "Monetarist" economic policies.

Similarly, the realisation and acceptance amongst the leaders of global institutions, such as
the World Bank and the International Monetary Fund, that in order for their restructuring
programmes for developing and emerging countries to be successful, it was necessary for all
elements of the wider society, including trade unions, to be involved in both their development
and implementation. In short, the Monetarist 'experiment' had failed, and the balance of public
opinion was swinging back towards labour and the need for a managed economy.

The combination of increasing confidence amongst investors and the widespread


opportunities within the Asian region during this period of rapid growth, led to a massive influx
of foreign capital. Similarly, the emerging economies in the former Soviet bloc provided
significant opportunities for high-return investments, as did most Latin American countries,
following the freeing-up of their mineral resources to foreign investors.

- 42 -
The onset of the financial crisis in Thailand in the summer of 1997 quickly spread to many
other Asian countries, reflecting the high level of interdependence between their financial and
economic sectors, now referred to as the "contagion factor", – which was previously
considered to provide a source of security and strength – as investor confidence collapsed
and people sought to transfer their capital into much more secure assets.

When the Russian crisis erupted in August 1998, the inability of the Russian Government to
sustain the value of the Rouble – estimated to have been costing them around $4 billion a
month – led to a further flight of capital, resulting in foreign direct investment in Russia falling
by over $120 billion.

The currency crisis which overtook Brazil in January 1999, provided yet another indication of
the fragility of the economies of many developing countries, and the subsequent devaluation
of the Real by 40% had profound implications for the whole of Latin America.

The impact of these three successive crises was clearly reflected in the fall in world GDP.
World growth fell from 3.2% in 1997 to just 2.0% in 1998, and most of the impact was felt in
the developing countries, whose combined GDP fell from 5.5% to just 1.5%. Indeed, if China
is omitted, the average GDP growth for developing countries in 1998 fell to just 0.4%.
However, it was the emerging economies, which were faced with the difficult process of
transformation from planned to free-market systems which suffered the most, with GDP falling
from 1.4% in 1997 to minus 1% in 1998. In contrast the developed industrialised countries
were able to maintain GDP growth at 2.3%.

World growth in 1999 contradicted the pessimistic predictions of most forecasters, increasing
by over 3%. However, there were substantial variations between some of the different
countries and regions.

The Latin American region fared the worst, with GDP declining by 0.3%, while the countries in
the former Soviet Union only fared a little better, achieving a growth rate of 0.2%. South Africa
saw its GDP rise by 1.7% while the EU economy grew by 2.2%, while the USA continued to
confound those who have been predicting the end of the boom for the last two years,
increasing by a further 4% in 1999. The main exception amongst industrialised countries was
Japan, where the economy continued to stagnate.

- 43 -
Apparent Steel Consumption

World apparent steel consumption has increased steadily, if somewhat erratically, over the
last quarter of a century reflecting the peaks and troughs of the global economy, rising by
more than 200 mt (fsp) (41.0%) from 495 mt in 1975 to just under 700 mt in 1999. (See
Figure 1).

Figure 1 World Apparent Steel Consumption

800

750

700
m t fsp

650

600

550

500
75

77

79

81

83

87

89

91

93

95

97
*

**
85

99

05
19

19

19

19

19

19

19

19

19

19

19
19

19

20
*estimate ** forecast
Source: IISI

During this period we have witnessed three major crises. After rising by more than 100 mt
(20.2%) in the four years from 1975 to 1979 and peaking at just under 600 mt, steel demand
fell over the following three years by 60 mt (10.0%) to 537 mt before regaining its upward
momentum, rising by 127 mt (23.7%) over the following seven years, to reach a new record
level of 664 mt in 1989. From 1989 to 1992 steel consumption fell by 57 mt (8.6%) to 607 mt,
reflecting the considerable fall in steel demand in the former Soviet Union, following the break-
up of the Comecon bloc and the transition from demand to market economies.

From 1992 until 1997 apparent steel consumption rose by 91 mt (15.0%) to a new record
level of 698 mt, before the impact of the Asian, Russian and Brazilian crises resulted in steel
demand falling by almost 7 mt (1.0%) in 1998 to 691 mt. However, steel demand began to
increase throughout 1999, recovering virtually all of the loss incurred in 1998.

World apparent steel consumption is forecast to increase by some 19 to 20 mt this year


(2.9%), to reach almost 720.0 mt, before settling down to a more modest rate of growth of
around 1.25% pa. This should result in apparent steel demand achieving new records of
production each year for the next five years, with total steel consumption exceeding 760 mt in
2,005.

Within this underlying pattern of increasing demand, there have been some significant
differences in the rates of development in the various countries or regions during the last
decade, (See Appendices 9, 10 and 12).

- 44 -
In contrast with most of the other major steel consuming regions, the EU did not come out of
the recession in the early 1990's until 1994, with demand increasing by 14.6 mt (14.4%) in
1994, and by 11.1 mt (9.5%) in 1995, raising apparent steel consumption to 127.4 mt. After
falling by 11.6 mt (9.1%) in 1996 steel demand continued to increase, seemingly unaffected
by the problems being experienced elsewhere, rising by 20.3 mt (17.5%) in the following two
years to reach 136.1 mt in 1998. And while demand fell by around 1.5 mt (1.1%) in 1999, it is
expected to rise by some 4.5 mt (3.4%) this year and by around half a million tonnes per
annum over the next five years, reaching 142 mt by 2,005, (See Figure 2).

Figure 2 European Union ASC


150
140
m t fsp

130
120
110
100
1992 1993 1994 1995 1996 1997 1998 1999* 2000* 2005**
*estimate ** forecast
Source: IISI

The rate of growth in demand for steel was far more consistent in "Other Europe", rising by
over 9 mt (36.6%) from 25.7mt in 1994 to 35.1mt in 1998, and is expected to rise by a further
4.9 mt or so (14.0%), to reach 40.0 mt by 2,005, increasing by 2.1 mt (5.9%) this year, and by
a further 2.5 mt (6.7%) over the next five years (see figure 3)

Figure 3 Other Western Europe ASC


45

40
m t fsp

35

30

25
1992 1993 1994 1995 1996 1997 1998 1999* 2000* 2005**
*estimate ** forecast
Source: IISI

Apparent steel consumption in the Middle East rose by 3.3 mt (31.1%) to 13.9 mt in the
seven years to 1999, but has been quite volatile over this period, with steel demand falling by
almost 1.0 mt (7.7%) in 1994 and 1.9 mt (14.3%) in 1998. However, steel consumption is
expected to rise by 0.3 mt (2.2%) this year and by a further 0.8 mt (5.6%) over the next five
years to reach 15.0 mt by 2,005 (See Figure 4).

- 45 -
Figure 4 Middle East ASC
16
15
14
mt fsp

13
12
11
10
1992 1993 1994 1995 1996 1997 1998 1999* 2000* 2005**
*estimate ** forecast
Source: IISI

Prior to the onset of the crisis in the Asian region, apparent steel consumption rose by 67.9
mt (28.6%) to reach 305.7 mt in the five years from 1992 until 1997, although the bulk of that
increase was recorded in 1993, when demand increased by 41.0 mt (17.2%). Reflecting the
downturn in economic activity in the Asian region as a whole in the second part of 1997, steel
demand fell by 20.0 mt (6.5%) in 1998. However, much of the drop in steel consumption was
regained in 1999, as steel demand rose by more than 16 mt (5.9%) to 302.5 mt. Apparent
steel consumption in Asia is expected to increase by almost 9 mt (2.9%) this year, and by a
further 33.6 mt (10.8%) over the next five years (See Figure 5).

Figure 5 Total Asia ASC

350
mt fsp

300
250
200
1992 1993 1994 1995 1996 1997 1998 1999* 2000* 2005**
*estimate ** forecast
Source: IISI

Apparent steel consumption in the three NAFTA countries rose by 42.7 mt (42.0%) to 144.3
mt in the 6 years from 1992 to 1998, despite a fall of 7.8 mt (6.2%) in 1995. However, the
bulk of the increase in steel consumption occurred in the USA and Canada, which saw their
steel consumption levels rising by 41.6% and 57.7% respectively. Apparent steel demand is
expected to be 9.7 mt (6.7%) lower in 1999 and only increase by 1.0 mt (0.7%) this year, and
by a further 4.4 mt (3.2%), over the next five years, reaching 140 mt by 2005 (See Figure 6).

- 46 -
Figure 6 NAFTA ACS

160

140
mt fsp

120

100
1992 1993 1994 1995 1996 1997 1998 1999* 2000* 2005**
*estimate ** forecast
Source: IISI

Apparent steel consumption in South America rose by 9.0 mt (45.5%) from 19.8 mt in 1992 to
28.8 mt in 1997, before falling by 2.0 mt (6.9%) to 26.8 mt in 1999. Reflecting the rapidly
improving economic climate, steel demand is expected to rise by 2.2 mt (8.2%) to 29.0 mt
this year, and by a further 4.0 mt (13.8%) to reach 33.0 mt by 2005 (See Figure 7).

Figure 7 South America ASC

35

30
mt fsp

25

20
1992 1993 1994 1995 1996 1997 1998 1999* 2000* 2005**
*estimate ** forecast

Source: IISI

After falling by 0.2 mt (1.5%) from 13.1 mt in 1992 to 12.9 mt in 1993, steel consumption in
Africa rose by 0.7 mt (5.4%) to 13.6 mt in the next two before increasing by a further 1.6 mt
(11.8%) to 15.2 mt from 1996 to 1998. However, steel demand fell by 1.2 mt (7.9%) in 1999,
and is only expected to recover by 0.2 mt (1.4%) this year, and by a further 0.8 mt (5.6%) in
the following five years, reaching 15.0 mt by 2005 (See Figure 8).

- 47 -
Figure 8 Africa ASC

16
mt fsp

14

12
1992 1993 1994 1995 1996 1997 1998 1999* 2000* 2005*
*estimate ** forecast
Source: IISI

Apparent steel consumption rose steadily in the Antipodes during the three years from 1992
to 1995, increasing by 1.5 mt (30.0%) to 6.5 mt, and remained at that level for the following
two years, before rising by 0.2 mt (3.1%) to 6.7mt in 1998. Steel consumption fell back to 6.5
mt in 1999, and is expected to remain at that level in 2,000. However, apparent steel
consumption is expected to increase by a further 0.5 mt (7.7%) to reach 7.0 mt by 2005 (See
Figure 9).

Figure 9 New Zealand and Australia

7.5
mt fsp

6.5

5.5
4.5
1992 1993 1994 1995 1996 1997 1998 1999* 2000* 2005**
Source: IISI *estimate ** forecast

In stark contrast to the general course of development, apparent steel consumption in the
former Soviet Union fell by 48 mt (62.0%), from 77.4 mt in 1992 to 29.4 mt in 1997. Steel
demand improved marginally in 1998, up by 0.2 mt (0.7%) to 29.6 mt , and by a further 0.9 mt
(3.0%) to 30.5 mt in 1999. Steel consumption is expected to increase by a further 0.8 mt
(2.6%) this year, and by 1.7 mt (5.4%) to 33 mt by 2005, when it will represent less than 43%
of its 1992 level and below one fifth of its previous record level (See Figure 10).

Figure 10 C I S ASC
80
m t fsp

60
40
20
1992 1993 1994 1995 1996 1997 1998 1999* 2000* 2005**
*estimate ** forecast
Source: IISI

- 48 -
World Steel Production

Total crude steel production has increased by around 150 mt (23.3%) during the past twenty-
five years. However, reflecting developments in the global economy, the underlying upward
progress has been disrupted by three major crises, (See Figure 11).

Figure 11 World Crude Steel Production

800
750
mt

700
650
600

*
75

77

79

81

83

85

87

89

91

93

95

97

99
19

19

19

19

19

19

19

19

19

19

19

19

19
Source: IISI *estimate

After increasing by 103 mt (16.0%) in the four years from 1975 to 1979, reaching a record
output of 747 mt, crude steel production fell by 102 mt (13.7%) in the following three years to
645 mt in 1982.

Following the recovery of the world economy in the mid-1980's and the increase in steel
consumption, crude steel production rose by 141 mt (21.9%) over the next seven years,
reaching a new world record of 786 mt in 1989. However, the downturn in demand which
began in 1990, saw crude steel production fall by 63.0 mt (8.0%) over the next three years,
dropping to 723.0 mt. The growth in world GDP during the mid-1990's saw output rise by
76.0 mt (10.5%) over the next five years, reaching a new record of just under 800 mt in 1997.

The impact of the Asian and Russian financial crises resulted in steel production falling by
some 21.9 mt (2.7%) in 1998, with world crude steel output falling to 777 mt, while the
subsequent spread of the financial crisis to Brazil and the devaluation of the Real early in
1999, theatened a collapse of global proportions. However, the combined strength of the US
and EU economies, coupled with the rapid recovery in most Asian countries, saw crude steel
production beginning to increase during the latter part of 1999. As a result, steel production
for 1999 is expected to remain at or about the 1998 level, with monthly crude steel production
increasing from 60.8 mt in January 1999, to 66.86 mt in December.

Reflecting the rapidly improving economic climate, monthly crude steel production rose by a
further 1.833 mt (2.7%) in January 2000, reaching 68.69 mt. This represents an annual
production rate of 824.3 mt. However, the preliminary figures for February indicate a fall to
just under 65.0 mt, which represents the average production level for the last two years.

Apart from the countries which made up the former Soviet Union most countries have been
able to benefit from the increase in world crude steel production since the early 1990's,
however, there has been some substantial variations between the major steel-producing

- 49 -
regions or countries during the last two years, reflecting to a significant extent, their degree of
dependency on exports or imports, (See Appendix 11).

Monthly average crude steel production in Brazil increased by 0.07 mt (3.3%) from 2.1 mt.pm
in the first quarter of 1998, to 2.2mt.pm in the second quarter, and increased by a further 0.1
mt.pm (4.6%) in the third quarter, before falling by 0.3 mt (13.0%) to an average of 2.0 mt.pm
in the last three months of 1998 and the first quarter of 1999. A slight recovery took place in
the second quarter of 1999, with production rising by 0.1 mt (5.0%) to 2.1 mt.pm, at which
level it remained for the rest of the year. Despite the much greater stability in production
levels, total output fell by 1.0 mt (3.9%) to 24.9 mt in 1999 (See Figure 12).

Figure 12
Monthly Steel Production 1998-1999
16

14

12

10
mt

0
ay

ay
n
p

p
n.

ar
.

l
v

v
Ju

Ju
ar

Ja
Se

Se
No

No
Ja

M
M

E:U: C.I.S. NAFTA Japan Brazil

Source: IISI

Japanese steel output contined to decline during 1998, falling from an average of 8.1 mt.pm
in the first quarter, to 7.6 mt.pm in the fourth quarter. Crude steel production fell further in the
fir3t three months of 1999, falling to 7.2 mt.pm, down by 0.86 mt.pm (10.7%) on the same
period in 1998. Reflecting the upturn in economic activity in Asia generally, steel output
began to increase in Japan in the second quarter, rising by 0.3 mt.pm (5.0%) to 7.56 mt.pm,
by a further 0.5 mt.pm (6.6%) in the third quarter, and by another 0.5 mt.pm (6.2%) in the final
quarter of the year, reflecting an increase of 1.36 mt.pm (18.9%) during the last nine months of
1999. Reflecting the improved performance in the last quarter of the year steel production in
1999 rose by 0.5 mt (0.5%).

Steel production in the three Nafta countries declined steadily during 1998, falling by 1.57
mt.pm (14.0%), from 11.2 mt.pm in the fist quarter to 9.6 mt.pm in the fourth quarter.
Reflecting the significant reduction in the level of imports, output rose steadily throughout
1999, increasing by 1.0 mt.pm (10.1%), from an average of 10.2 mt.pm in the first quarter of
the year, to 11.2 mt.pm in the fourth quarter. As a result total steel production increased by 0.1
mt (0.08%), rising from 128.4 mt in 1998 to 128.5 mt in 1999.

- 50 -
Output in the CIS countries rose slightly in the second quarter of 1998 with steel production
increasing by 0.07 mt (1.2%), to 6.1 mt.pm, before falling by an average of 0.5 mt.pm (8.2%)
during the third and fourth quarters, with output falling to just 5.1 mt in September 1998. Steel
production increased by 0.43 mt.pm (7.5%) in the first quarter of 1999, and by a further 0.8
mt.pm (13.1%) in the second quarter. Steel production rose by 0.4 mt.pm (5.8%) to 7.33
mt.pm in the third quarter, and was maintained at this level for the last quartier. Reflecting the
improved situation in the second half of the year, total C.I.S. steel production rose by 12.7 mt
(18.0%), from 70.6 mt in 1998 to 83.3 mt in 1999.

Steel production in the EU, rose by 0.3 mt.pm (2.1%) from 14.1 mt.pm in the first quarter to
14.4mt.pm in the second quarter of 1998, before falling by 1.3 mt.pm (8.8%) in the third
quarter and by a further 0.53 mt.pm (4.2%) in the last quarter, with production in December
falling to just 10.4 mt. Output increased in the first quarter of 1999, rising by 0.26 mt.pm
(2.1%) to 12.5 mt.pm and by 0.97 mt.pm (7.8%) rising to 13.4 mt.pm in the second quarter.
However, production fell back to an average of 12.5 mt.pm in the third quarter before
recovering again to its previous level in the fourth quarter. Despite the recovery in the latter
part of the year, steel production in 1999 at 155.5 mt was 4.8 mt (3.0%) down on the 1998
level.

While the fall in world crude steel production was relatively modest in 1998, falling by some
22.0 mt (2.8%) in comparison with the two previous crises in 1982 and 1992, when
production fell by 101.6 mt (13.6%) and 71.8 mt (9.1%) respectively, the impact on the steel
market and industry as a whole was equally as severe.

Apparent Steel Consumption Per Capita

While comparisons of apparent steel consumption levels between various regions or within
particular countries over time, can provide a useful indication of relative economic growth, if
we wish to make a more accurate assessment, or ascertain the latent levels of steel demand
in particular countries, then we need to refer to the size of the population, that is per capita
consumption levels.

There are significant differences in the levels of apparent steel consumption per capita
between various countries and regions, and these have changed considerably in recent years
in some countries (See Figure 13).

- 51 -
Figure 13
Apparent Steel Consumption per Capita
400

350

300

250

200

150

100

50

0
1992 1993 1994 1995 1996 1997 1998
European Union Other Europe

Ex-USSR Middle East

Asia NAFTA

Central and South America Africa

New Zealand and Australia

Regions such as Latin America, Asia, the Middle East, and during the latter 1990's the former
USSR, have recorded per capita consumption levels of between 50 to 100 kg, while in Africa
the average has only amounted to 20 kgpc. This compares with around 350 kgpc in the EU
and NAFTA, while some of the more successful countries have achieved consumption levels
of 500 to 600 kgpc (See Appendix 10).

Developing countries are steadily increasing their share of total steel demand, but the older
industrialised nations are still responsible for a disproportionate share of steel consumption.
Yet the vast bulk of the world's population live in those regions with the lowest levels of steel
consumption. Consequently there is a massive potential for further increases in steel
consumption, as the infrastructure required for economic development is put in place, and the
populations of these countries are provided with the opportunity to satisfy their latent needs.

Direct Reduced Iron

World production of Direct Reduced Iron (DRI) continues to increase steadily, but its rate of
growth appears to be losing some of the momentum it enjoyed in the 1980's and early 1990's,
(See Appendix 6). However, it is widely expected that the Electric Arc Furnace route will
continue to find favour in the coming years, reflecting its lower start-up costs, quicker
commissioning time and significantly lower optimum size, providing a much higher level of

- 52 -
flexibility, in comparison with integrated steelplants which have a very much larger minimum
effective size, if they are to take advantage of economies of scale. Consequent-ly, the
increasing demand for good quality steel scrap will result in upward pressure on prices, and
this will create additional demand for a cost-effective alternative.

It is only a matter of time therefore before the problems currently besetting one or more of the
current technologies for producing DRI are overcome, providing yet another major advance in
steelmaking technology.

In the five years from 1993 to 1998, world production of DRI rose by 11.8 mt (50%) from 23.74
mt to 35.62 mt, and by 19.9 mt (126.9%) since 1989. However, there have been significant
differences in the level of growth in DRI production between the various countries and regions
where steelmakers have invested in this type of technology. (See Figure 14).

Figure 14 Direct Reduced Iron Production


9.00
8.00
7.00
6.00
5.00
x mt

4.00
3.00
2.00
1.00
0.00
1993 1994 1995 1996 1997 1998
European Union Russia
NAFTA C&SA
Africa Middle East
Source: IISI
Asia

Out of the 23 countries currently producing DRI via a selection of different processes, just 3,
Mexico, India and Venezuela, are responsible for close to half of total output, while the ten
largest DRI producers, provide over four-fifths of total world supplies,

In the five years from 1993 to 1998 DRI production has increased by over 75% in Asia and
more than 90% in the three NAFTA countries. And while output in Africa rose by close to one
million tonnes (37%) during this period, DRI production in Central and South America, which
was responsible for over 28% of world production in 1993, only increased by 1.4 mt (20.8%)
and is now responsible for a little more than 22% of total output. DRl production in Russia has
been erratic over this period, rising in 1994 and 1997 to more than 1.71 mt, but falling in 1998
to just 1.55 mt.

- 53 -
While DRI production data for 1999 is not available for all the countries concerned, the figures
available to date suggest that DRI output in 1999 is likely to reach a new record figure in
excess of 37 mt.

World Steel Trade

World trade has increased fivefold since 1975, rising from just under £1,000 billion to more
than £5,000 billion in 1999, as tariffs on a wide range of imported goods have been
progressively reduced. However, as a result of the collapse in Asian import volumes in 1998,
the rate of growth in world trade slowed considerably, falling by over half, from 9.8% in 1997 to
4.6% in 1998.

With the increase in steelmaking capacity in the developing world, and the significant
reduction in capacity in almost all of the older industrialised countries, in conjunction with the
costs of shipping relatively low value to weight cargoes over long distances, it might have
been expected that steel trade would diminish over time. However, the reality is the opposite,
and the level of world steel trade has increased at a much faster rate than the growth in steel
production.

Since 1975 crude steel production has risen by 156 mt (24.2%), from 643 mt in 1975 to 799
mt in 1997, whereas steel trade rose by 153 mt (133.0%) from 115 mt, when it represented
22.6% of total steel production, to 268 mt in 1997 when it accounted for 39.4% of total output.
Furthermore, the rate of growth in the tonnage of steel exports appears to be much less
affected by fluctuations in global demand than steel production. (See Appendix 13).

The USA and China were by far the biggest net importers of steel in 1998, accounting for over
40 mt, while Japan, S.Korea, Russia and the Ukraine were responsible for supplying net
exports of more than 77 mt, ( See Appendix 15 ). In 1999 the picture remained largely
unchanged, with the USA and China heading the list of net importers, and Japan, S.Korea,
Russia and the Ukraine, continuing to provide the bulk of steel exports.

Reflecting the impact of widspread anti-dumping charges, US net imports fell by 5.3 mt
(15.9%) to 28.0 mt in 1999, while China recorded an increase of 1.1 mt (14.9%), with imports
rising to 8.5 mt. Japan's net exports fell by 4.7 mt (23.3%) to 15.4 mt in 1999, while Korea's
net exports fell by 3.3 mt (2.8%) to 10.9 mt. Russia's net exports remained largely unchanged,
down by just 0.2 mt (1.0%) to 10.9 mt, while the Ukraine recorded an increase of 0.3 mt
(33.3%) to 0.6 mt.

- 54 -
World Steelmaking Capacity

The world steel industry is faced with a serious problem in respect of the substantial level of
surplus steelmaking capacity which currently exists, and which, as a result of continuing
investments in additional and replacement capacity, is getting steadily bigger.

In 1985 total crude steel production reached 718.9 mt, which represented 77.1% of the 932.6
mt of steelmaking capacity then available, reflecting a surplus of some 214mt, (See Table 1).
In the following five years steelmaking capacity rose by just 12.1 mt (1.3%) to 944.7 mt,
reflecting in no small part the cut in capacity in the former Soviet Union of close to 30.0 mt,
while production rose by 45.0 mt (6.3%) to 763.9 mt, resulting in the average rate of capacity
utilisation increasing to 80.9%, and the surplus falling to 180.8 mt.

Table 1

World Crude Steelmaking Capacity


1985 1990 1995 2000

Capacity (mt) 932.6 944.7 1,009.8 1,109.6

Production (mt) 718.9 763.9 751.1 796.9

Capacity Utilisation (%) 77.1 80.9 74.4 71.8

Source OECD

However, since 1990 the situation has got progressively worse, with the gap between
production and capacity increasing to 258.3 mt in 1995 and to 312.6 mt in 2,000, as
investments in new capacity have far outstripped any increases in demand, (See Figure 15).

Figure 15
World Crude Steelmaking Capacity
1150
1050
950
mt

850
750
650

1985 1990 1995 2000

Source: OECD, IISI Capacity Production

- 55 -
Indeed, the situation would have been far worse if the Asian crisis had not led to several
projects being postponed. Even so there are several developments underway that will be
coming on stream in the near future. Consequently the rate of increase in steelmaking
capacity is likely to remain relatively high, and the growing gap between capacity and
consumption levels will continue to provide a source of insecurity in the steel market.

Capacity Utilisation

Reflecting the very different economic circumstances in steel producing countries and the
extent of their dependency on export markets, the levels of capacity utilisation have varied
from country to country and region to region in the last 3 years (See Appendix 17). Among the
major steel producers in the EU, capacity utilisation rates ranged from 67.0% in Italy to over
80.0% in France, Germany and the UK. Amongst the smaller steel producing countries
utilisation rates ranged from 22.0% in Greece and 57.0% in Luxembourg, to over 90% in the
Netherlands, Austria and Finland. Belgium and Finland however were able to increase
capacity utilisation rates over this period.

Many of the former Soviet bloc countries including Russia, Romania, Kazakhstan and the
Ukraine, have recorded utilisation levels at or below 60% in recent years, while the Czech and
Slovak Republics achieved levels in excess of 70% in 1997 and 1998. However, capacity
utilisation fell below 66.6%, in the Czech Republic in 1999. In contrast Poland achieved 85%
and Hungary almost 95% of capacity utilisation.

In South America, Brazil, Chile and Venezuela all recorded utilisation rates above 80% while
Argentina was only able to achieve 66% utilisation.

In Africa Egypt achieved in excess of 85% capacity utilisation, while S. Africa was only able to
reach 57%. In the Middle East, Iran recorded a 75% capacity utilisation, while Saudi-Arabia
was able to reach 89%.

In the Nafta countries, the USA and Mexico both exceeded 86% while Canada's rate was
over 90%.

In the Asian region capacity utilisation levels varied from 33.3% in Thailand to around 50% in
Indonesia and Malaysia, in excess of 60% in Japan and the Philippines, over 80% in India
and more than 90% in both China and Taiwan.

Steel Prices

As noted above, steel demand is largely determined by and accentuates the swings in the
economic cycle. Prices, however are much more volatile, falling rapidly when demand drops,
or when the market is over-supplied, but recovering much more slowly as demand begins to
pick up and consumers and stockholders gain sufficient confidence to increase stock-levels.

During the 1990's hot-rolled coil prices fluctuated widely within and between countries (See
Table 2). Despite the fact that hot-rolled coil is a widely available product, there continuess to
be significant differences in the prices in different countries or regions, although if is evident
that there was a significant fall in steel prices in 1998 and 1999 in all regions of the world.

- 56 -
Table 2

Hot-Rolled Coil Prices (x US$/t)

1992 321 331 343 582 328


1993 368 327 303 511 319
1994 415 345 361 463 330
1995 381 364 469 450 340
1996 358 374 363 433 325
1997 364 350 303 433 220
1998 336 338 326 388 220
1999 305 238 221 350 257
Source: Metal Bulletin

Steel prices are extremely difficult to quantify or compare, given the wide range of grades or
qualities of steel that are available, and the extent of discounts that are offered, particularly for
larger tonnages, as well as the effect of currency fluctuations. However, some indication of
the substantial shifts that have occurred in steel prices in recent years can be obtained by
comparing published steel prices in some of the major importing and exporting countries.

With the exception of one year in the last nine, HRC prices have been the highest in Japan,
and for seven of these years, the lowest prices have been in South Korea. In contrast, hot-
rolled coil prices were the highest in the E.U. in 1995, but the lowest in 1993 and 1999.

Hot-rolled coil prices rose in the USA by $94.00/t (29.3%) from $321.00/t in 1992 to $415.00/t
in 1994, before falling over the next five years by $110.00/t (26.5%) to $305.00/t in 1999 (See
Figure 16).

Figure 16 USA
440
420
(USDollars/t)

400
380
360
340
320
300
1992 1993 1994 1995 1996 1997 1998 1999

- 57 -
In Japan hot-rolled coil prices fell by $232.00/t (39.9%) from $582.00/t in 1992 to $350.00/t in
1999 (see figure 17).

Figure 17 Japan

600
(USDollars/t)

550
500
450
400
350
1992 1993 1994 1995 1996 1997 1998 1999

Hot-rolled coil prices in S.Korea peaked at $310.00/t in 1995, having risen by $12.00/t (3.7%)
from $328.00/t in 1992, before falling by $120.00/t (35.3%) to $220.00/t in 1998, and then
recovering by $37.00/t (16.8%) to reach $257.00/t in 1999 (see figure 18).

Figure 18 S.Korea

360
340
320
300
280
260
240
220
200
1992 1993 1994 1995 1996 1997 1998 1999

In the E.U. hot-rolled coil prices fell by $40.00/t (11.7%) to $303.00/t in 1993, before
increasing over the next two years by $166.00/t (54.8%) to $469.00/t in 1995. Steel prices fell
rapidly in 1996 and 1997, dropping by $166.00/t (35.4%) to return to the 1993 level. EU
prices recovered in 1998, up by $23.00/t (7.6%) to $326.00/t, before falling a further $105.00/t
(32.2%) in 1999 to $221.00/t,(see figure 19).

Figure 19 E.U.

500
(USDollars/t)

400

300

200
1992 1993 1994 1995 1996 1997 1998 1999

- 58 -
In Brazil hot-rolled prices increased by $47.00/t (14.4%) from $327.00/t in 1993 to $374.00/t
in 1996, since when they have fallen by $136.00/t (36.4%) to $221.00/t (see figure 20).

Figure 20
Brazil

400
350
(USDollars/t)

300
250
200
1992 1993 1994 1995 1996 1997 1998 1999

Employment

During the last 25 years employment levels have fallen by anywhere from 50% to 75%, and in
some cases in excess of 80%, in most of the older industrialised countries. Even so there is
no respite, and employment levels continue to fall in all countries, reflecting the constant
pressure to improve productivity and reduce employment costs, which has become one of the
hallmarks of the modern day steel industry.

Technological developments such as Con-Cast and Mini-Mills for example, all resulted in
significantly reducing manning levels, but it is the processes of privatisation and restructuring
which have been the main factors responsible for the rapid fall in employment in the steel
industry, as jobs are cut to improve profitability and thus the attractiveness of the companies
to private investors, as well as reducing any future liability for redundancy payments for the
new owners.

Another important factor affecting the level of employment in the steel industry is the
globalisation process, which is resulting in the concentration of ownership through mergers
and acquisitions, which invariably results in further restructuring and job-losses.

Technological developments in thin-strip casting and direct reduced iron will continue to
improve efficiency and cut employment levels in the steel industry. Even so there has been
some significant variations in both the extent and the timing of the cutback in labour.

- 59 -
Employment in Italy rose by 5,000 (5.2%) to 101,000 from 1975 to 1980, before falling by
62,500 (61.9%) over the next 18 years, (See Figure 21).

Figure 21
Italy
110
90
'000

70
50
30
1975 1980 1985 1990 1995 1998

Employment

Elsewhere in Europe employment levels have declined consistently over this period with
employment in Germany falling by 146,500 (64.5%) from 226,700 in 1975 to 80,200 in 1998.
Manpower levels in the Spanish steel industry fell by 67,900 (76.7%) from 90,900 in 1975 to
23,000 in 1998, (See Figures 22,23).

Figure 22 Figure 23 Spain


Germany
100
270
80
220
'000

60
'000

170
40
120
70 20
1975 1980 1985 1990 1995 1998 1975 1980 1985 1990 1995 1998

Employment Employment

In France the number of jobs in steel fell by 119,200 (75.9%) over this twenty-three year
period, falling from 157,000 in 1975 to 37,800 in 1998, while in the UK employment levels fell
by 156,900 (82.2%) from 190,700 in 1975 to 33,800 in 1998, (See Figure 24,25).

Figure 24 Figure 25
France U. K.
180 180
'000

'000

130 140
100
80
60
30 20
1975 1980 1985 1990 1995 1998 1975 1980 1985 1990 1995 1998

Employment Employment

- 60 -
Job losses in Japan followed a similar pattern as those in the other industrialised countries,
falling by 187,400 (57.8%) from 324,400 in 1975 to 137,000 in 1998. In contrast employment
levels in Korea increased by 7,800 (12.8%) from 1980 to reach 68,900 in 1990. Since then
manning levels have fallen by 9,400 (13.6%), to 59,500 in 1998, (See Figures 26,27).

Figure 27
Figure 26
Japan S. Korea

350 70
300
250 65
'000

'000
200
60
150
100 55
1975 1980 1985 1990 1995 1998 1980 1985 1990 1995

Employment Employment

Employment levels in the Chinese steel industry are particularly difficult to ascertain. However,
from the information that is available, it appears that employment continued to rise until 1990,
when it reached a peak of 2.41 million. However, in the last 8 years employment has fallen by
around 1.41 million (58.5%) to somewhere in the region of 1 million by the end of 1998, (See
Figure 28).

Figure 28 China

2500

2000
'000

1500

1000
1985 1990 1998

Employment

In the USA manpower levels have been reduced by 310,400 (66.0%) falling from 470,400 in
1975 to 160,000 in 1998, (See Figure 29).

Figure 29
U.S.A.
550
'000

350

150
1975 1980 1985 1990 1995 1998

Employment

- 61 -
Employment in the Mexican steel industry rose by 37,600 (80.0%) from 47,000 in 1975 to
84,600 in 1985, before falling by 43,300 (51.2%) to 41,300 in 1998. Following a similar
pattern, employment levels increased in Brazil by 22,200 (17.9%) to reach 146,100 in 1980,
before falling by 83,100 (56.9%) in the last thirteen years, with the steel industry now
accounting for just 63,000 jobs, (See Figures 30,31).

Figure 30 Mexico Figure 31 Brazil


150

80.0 130

70.0 110

000
'000

60.0 90
50.0
70
40.0
1975 1980 1985 1990 1995 1998 50
1975 1980 1985 1990 1995 1998
Employment Employment

The continuing fall in employment levels has resulted in a drastic reduction in recruitment. And
as preference for redundancy is usually given to older workers, on the basis of trade union
seniority, this has resulted in the creation of an extremely unbalanced age pyramid in many
countries, with the bulk of the workforce aged between 35 and 55 years of age. Unless steps
are taken to rectify this situation, this is likely to cause considerable problems in the not too
distant future.

Productivity

With the massive fall in employment in all countries, but little or no change in crude steel
production levels in most countries, the increase in productivity in the last 25 years has been
phenomenal.

In Germany for example, crude steel production at 44.05 mt was 3.64 mt higher (9.0%) in
1998 than in 1975, while employment fell by 146,500 (64.6%) from 226,700 to 80,200. As a
consequence productivity, as measured in "tonnes per man year" (tpmy), rose by 371 tpmy
(208.1%) from 178.3 tpmy in 1975 to 549.3 mhpt in 1998. That is an average of 9.1% per
annum, (See Figure 32).

Figure 32
Germany
46 650
44 550
42
tpmy

450
mt

40
350
38
36 250
34 150
1975 1980 1985 1990 1995 1998

Production Productivity

- 62 -
Similarly, in the UK employment fell by 156,900 (82.3%) over this period, while production
dropped by 2.48mt (12.5%) to 17.3mt in 1998, resulting in an increase in productivity of 407.8
tpmy (393.3%) from 103.7 to 511.5 tpmy, (See Figure 33).

Figure 33 U. K.
20 550
18 450

tpmy
16 350
mt

14 250
12 150
10 50
1975 1980 1985 1990 1995 1998

Production Productivity

The French steel industry underwent similar experience. As employment fell by 119,200
(75.9%) to 37,800, production was reduced by 1.4 mt (6.5%) to 20.1mt, resulting in an
increase in productivity of 395.4 tpmy (288.4%), raising the current level to 532.5 tpmy, (See
Figure 34).

Figure 34
France
25 600
23 500
tpmy

21 400
mt

19 300
17 200
15 100
1975 1980 1985 1990 1995 1998

Production Productivity

In Italy employment continued to rise until 1980, since when it has fallen by 62,500 (61.9%) to
38,500. Crude steel production has fluctuated over this period, but increasing by 3.93 mt
(18.0%) over the period as a whole. As a result productivity rose by 442.3 tpmy (194.2%) to
670.1 tpmy, (See Figure 35).

Figure 35 Italy

30 800
tmy

600
mt

25 400
20 200
1975 1980 1985 1990 1995 1998

Production Productivity

- 63 -
In the USA manpower levels fell by 310,400 (66.0%) to 160,000, while output, after falling by
more than 16.75 mt (15.8%) to 80.1mt in 1985, rose by 7.23 mt (9.0%) to 97.3 mt in 1998.
Consequently productivity rose considerably over this period, up by 383.1 tpmy (170.3%) to
608.1 tmpy, (See Figure 36).

Figure 36
U.S.A.
120 700
110 600
500

tpmy
mt

100
400
90 300
80 200

1975 1980 1985 1990 1995 1998

Production Productivity

Employment rose in Brazil from 1975 to 1980, up by 22,200 (17.2%) to reach 146,100 in
1980, before falling by 83,100 (56.9%) to 63,000 in the last 8 years. Despite the fall in
manning levels output rose by 17.37 mt (207.0%) to 25.8mt, resulting in productivity rising by
341.2 tmpy (504.0%) to 408.9 tpmy, (See Figure 37).

Figure 37
Brazil
30
450
25
tpmy

350
20
mt

15 250
10 150
5 50
1975 1980 1985 1990 1995 1998

Production Productivity

The trends in employment, production and productivity in Mexico followed contrary paths in the
first 10 years of this period, with employment rising by 37,600 (80.0%) to 84,600, while
production increased by 2.13 mt (40.4%) to reach 7.4mt. Consequently productivity fell by
24.6 tpmy (22.0%) to 87.5 tpmy in 1985. Since then however, the trends have followed the
general pattern. Employment has fallen by 43,300 (51.2%) to 41,300, production has
increased by 6.81 mt (92.0%) to 14.2 mt, and productivity has risen by 256.6 tpmy (293.3%)
to 344.1 tpmy in just 13 years. That is an average of 22.6% p.a, (See Figure 38).

- 64 -
Mexico
Figure 38
15 350
13

tpmy
11 250

mt
9 150
7
5 50

1975 1980 1985 1990 1995 1998


Production Productivity

In Japan employment has fallen by 187,400 (57.8%) to 137,000 in 1998. In contrast,


production has fluctuated, rising in 1980 to 111.4 mt before falling to 105.3 mt in 1985 and
then increasing to 110.3 mt in 1990. Since then production has fallen by 16.75 mt (15.2%) to
93.6mt. However, productivity increased steadily over this period, rising by 367.5 tpmy
(116.5%) to 682.9 tpmy. This is equal to a rise of 16.0 tpmy or 5.1% p.a, (See Figure 39).

Figure 39 Japan

120 700

110 600
mt

100 500

90 400

80 300
1975 1980 1985 1990 1995 1998

Production Productivity

In S. Korea, employment levels continued to rise until 1990, increasing by 7,800 (12.8%) to
68,900, since when they have fallen by 9,400 (13.6%) to 59,500 in 1998. In contrast
production has increased by 37.91 mt (1.905%) to 39.9 mt, and productivity has risen by
575.7 tmpy (606.6%) to 670.6 tpmy in just 18 years. This represents an increase in
productivity of 33.7% p.a, (See Figure 40).

Figure 40 S. Korea
50
40 650
tpmy

30
mt

450
20
250
10
0 50
1975 1980 1985 1990 1995 1998

Production Productivity

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Obtaining reliable data for employment in China is extremely difficult, however it appears that
reflecting the increase in output, manpower levels rose steadily until 1990, when they
amounted to some 2.41 million. Since then employment has fallen by 1.41 million (58.5%) to
around 1 million. With steel production rising by 77.02 mt (207.5%) to 114.14 mt, productivity
levels have increased by 92.8 tpmy (439.0%) to 114.1 tpmy in 1998. An average of 33.8%
per annum, (See Figure 41).

Figure 41 China

120
130 100
80

tpmy
mt

80 60
40
30 20
1980 1985 1990 1995 1998

Production Productivity

In S. Africa employment levels continued to rise until 1985, since when they have fallen by
49.000 mt (44.6%) to 61,000, while production followed a contrary path. After rising by 2.24
mt (32.8%) to reach 9.1mt in 1980, output has since fallen by 1.56 mt (17.2%) to 7.51 mt. As a
result productivity has increased over the last 13 years by 54.8 tpmy (80.2%) to 123.1 tpmy,
an average improvement of 6.2% p.a, (See Figure 42).

Figure 42 S. Africa
10 130
120
9 110
8
tpmy

100
mt

7 90
80
6 70
5 60
1975 1980 1985 1990 1995 1998
Production Productivity

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Employment in Australia fell steadily until 1990, dropping by 24,800 (57.3%) to 18,500 in
1990, before increasing by 3,500 (18.9%) in the next 5 years to 22,000, and then falling by
2,000 (9.1%) to 20,000 in 1998. Steel production fell by 1.27 mt (16.1%) to 6.6 mt from 1975
to 1990, before rising by 2.34 (35.5%) to 8.9mt by 1998. During this time productivity, which
fell slightly from 1975 to 1980, has increased by 270.3 tpmy (153.0%) to 447.0 tpmy, an
average increase of 8.5% p.a, (See Figure 43).

Figure 43 Australia

10 450
9 400
350
8

tpmy
mt

300
7 250
6 200
5 150
1975 1980 1985 1990 1995 1998

Production Productivity

Manning levels in Spain have been reduced by 67,900 (74.7%) since 1975, falling from
90,900 to 23,000 in 1998. Meanwhile output has risen overall by 3.7 mt (33.3%) to 14.8 mt.
As a result productivity has increased by 521.4 tpmy (427.0%) from 122.1 tpmy to 643.5
tpmy, an average rise of 18.6% p.a, (See Figure 44).

Figure 44
Spain
15 700
14
500
tpmy

13
mt

12 300
11
10 100
1975 1980 1985 1990 1995 1998

Production Productivity

It should be noted that whilst the assessment of productivity is based on production and
manpowere levels, the rate of capacity utilisation which is determined by a wide range of
factors, such as the level of orders and product mix, over which the workers have little or no
control, determines to a significant extent the levels of tonnage upon which the workers'
productivity levels are calculated.

Furthermore, where steelplants are operating at relatively low levels of capacity-utilisation,


there is considerable scope for further improvement, but conversely, where plant operating
performance is close to the optimum levels, then the only possible option to further improve
productivity is by reducing the size of the workforce.

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