Global Steel Trade; Structural Problems and Future Solutions

Production Shares (percent)
Production Shares (percent)
100
90
80
70
60
50
40
30
20
Kobe Sumitomo NKK Kawasaki Nippon
10
0
1978 1981 1984 1987 1990 1993 1996 1999
100
Source: Corporate financial statements filed with Ministry of Finance, Table D.
90
80
70
60
50
40
30
20
10
3-18. Japanese Crude Steel Production Shares for the Five
Major Producers (years ending March 31)
Nucor
LTV
Armco/AK
Inland
National
Republic
Bethlehem
USX
0
1976 1979 1982 1985 1988 1991 1994 1997
Source: Financial Dynamics of 61 International Steelmakers, Paine Webber.
3-19. U.S. Crude Steel Production Shares Including
the Top Five Companies
just over 40 percent of
production, followed by NKK
at 18 percent, Kawasaki and
Sumitomo at 16 percent, and
Kobe at 9 percent (Chart
3-18).
By comparison, crude steel
production for the top five U.S.
producers over the same time
period shows no clear pattern
(Chart 3-19). Moreover, new
U.S. companies have broken
into the top five over time,
while others have dropped
out—a dynamic that has been
absent in the Japanese steel
industry.
Unchanging production shares
among Japan’s top steel
producers dating back to the
mid-1970s was a cause for
concern for Japan’s Fair Trade
Commission in a 1994 industry
survey. While the JFTC did not
formally conclude that a cartel
exists among Japanese
producers, it noted the longterm
rigidity in production
shares, and expressed concern
that “in an oligopolistic
industry, even a minor
exchange of information can
easily bring about a common
intention regarding supply
quantities.” 12 Since then,
production shares remained
constant through the time of
the export surge. The Japanese
government has not revisited
the issue of the lack of
competition. A number of experts suggest that, aside from simply tolerating such behavior, the Ministry of
International Trade and Industry (MITI) plays a role in overseeing the allocation of production shares
among firms, albeit in a less active manner than in past decades. 13
Given the many variables that affect a major industry like steel—e.g., different investment rates and labor
and production changes—the ability of these producers to maintain constant production shares over such a
long period is highly unusual, and cannot be written off as a coincidence. Instead, as a number of experts
have observed, it is indicative of industry coordination to control production dating back to the creation of
Nippon Steel in the 1970s and continuing through the 1990s.
68 Global Steel Trade: Structural Problems and Future Solutions