VlogBee

I came across these numbers because the century-plus-old company, once the symbol of America’s industrial might – originally founded by Andrew Carnegie and then merged by J.P. Morgan and Charles Schwab – is in all the news again.

Nippon Steel, Japan’s largest steelmaker, has offered a whopping US$14.1 billion, or US$55 a share, to take over US Steel. That has caused me enormous pain. Yours truly sold his shares in X, the steel company’s trade symbol, less than two months ago at US$33 after holding them since the last global financial crisis when I bought at US$50.

EU to investigate Chinese steel and aluminium sectors, with tariffs looming

The news sent shares to US$50 overnight!

Now I won’t bore you with my investment idiocy, but it’s been quite educational for me. The fall and rise of steel production in China and the rise and fall of US Steel tell a fascinating story about the two countries.

In its heyday, the company was the Apple of today, being the first to reach US$1 billion. Think of the most iconic skyscrapers, bridges and dams in the US from much of the 20th century, and they probably used supplies from US Steel; the Hoover Dam, the United Nations Secretariat Building in New York, Nasa’s Kennedy Space Centre in Florida … During the second world war, it employed 340,000 workers.

Last year, though, it employed just 15,000 people and shipped only 11.2 million tons of steel. It ranked 27th among steelmakers around the world.

The biggest in the world are, of course, from China, India and South Korea’s Posco.

The downfall came as once-smaller domestic steelmakers such as Nucor, currently the largest in the US, adopted new technologies, and then, the industrial rise of Asia.

But the real megatrend that did for US Steel was deindustrialisation and financialisation of US capitalism. And that meant offshoring production to developing countries such as China, which has its own fascinating steel history.

The communists’ first five-year plan of 1953-7 was actually a success when Mao let someone else in charge. In 1949, when the communists took over, steel output was just 158,000 tonnes. So hitting 5.35 million tonnes in less than a decade was no small achievement.

Interestingly, archival figures from the National Bureau of Statistics of China listed steel output of 12.2 million tonnes in 1965 from 5.9 million in 1958.

China’s hand-torn steel: a bold challenge to Western dominance

But that was only because after the great famine, Mao was sidelined from 1963 to 1965; pots and pans didn’t make usable quality steel, neither could dying peasants produce.

In 1966, the year Mao launched the Cultural Revolution, steel production reached 15.2 million tonnes. Output dropped rapidly in just two years, from 10.2 million tonnes to 9 million.

But it picked up again from the late 1960s to the early 1970s, from 13.33 million tonnes to 17.79 million. In 1977, a year after Mao died, production hit 23.7 million tonnes.

Then came Deng Xiaoping and his economic opening up. By the mid-2000s, output reached 355 million tonnes; and by 2011 steel output was 683 million. The problem, by then, was overproduction!

Today, China makes about 55 per cent of the world’s steel and produced 875 million tonnes in the first 10 months of this year.

Interestingly, US Steel’s unionised workers and some Congressional members now object to the sale, with the latter citing national security concerns. Imagine the uproar if it wasn’t Nippon Steel, but a Chinese company.

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