United States
Environmental Protection
Agency
Office Of Air Quality
Planning And Standards
Research Triangle Park, NC 27711
September 2002
FINAL REPORT
Air
     Economic Impact Analysis of
    Final Integrated Iron and Steel
                 NESHAP
               Final Report

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                                                 EPA 452/R-02-009
                                                    September 2002
           Economic Impact Analysis of
    the Final Integrated Iron and Steel NESHAP
                      By:
               Michael P. Gallaher
                Brooks M. Depro
Center for Regulatory Economics and Policy Research
                      RTI
        Research Triangle Park, NC  27709
                  Prepared for:
                  Tyler J. Fox
       U.S. Environmental Protection Agency
    Office of Air Quality Planning and Standards
    Innovative Strategies and Economics Group
                 (MD-C339-01)
        Research Triangle Park, NC 27711
          EPA Contract No. 68-D-99-024
          RTI Project No. 7647.003.274
               Steve Page, Director
       U.S. Environmental Protection Agency
    Office of Air Quality Planning and Standards
            Office of Air and Radiation
        Research Triangle Park, NC 27711

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This report contains portions of the economic impact analysis report that are related to the industry
                                          profile.

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                                          SECTION 2

                                     INDUSTRY PROFILE
       Iron is produced from iron ore, and steel is produced by progressively removing impurities from
iron ore or ferrous scrap.  Iron and steel manufacture is included under Standard Industrial Classification
(SIC) code 3312—Blast Furnaces and Steel Mills, which also includes the production of coke, an input
to the iron making process. In 2000, the United States produced  109.1 million tons of steel. Steel is
primarily used as a major input to consumer products such as automobiles and appliances.  Therefore,
the  demand for steel is a derived demand that depends on a diverse base of consumer products.

       This section provides a summary profile of the integrated iron and steel industry in the United
States. Technical and economic aspects of the industry are reviewed to provide background for the
economic impact analysis. Section 2.1 provides an overview of the production processes and the
resulting types of steel mill products.  Section 2.2 summarizes the organization of the U.S. integrated
iron and steel industry, including a description of the U.S. integrated iron and steel mills, the companies
that own these facilities, and the markets for steel mill products.  Section  2.3 describes uses and
consumers. Section 2.4 presents market data on the iron and steel industry, including U.S. production,
consumption, foreign trade and prices. Finally, Section 2.5 discusses recent trends in the steel industry.
2.1     Production Overview

       Figure 2-1 illustrates the four-step production process for the manufacture of steel products at
integrated iron and steel mills.  The first step is iron making.  Primary inputs to the iron making process
are  iron ore or other sources  of iron, coke or coal, and flux. Pig iron is the primary output of iron
making and the primary input to the next step in the process, steel making.  Metal scrap and flux are also
used in steel making.  The steel  making process produces molten steel that is shaped into solid forms at
forming mills. Finishing mills then shape, harden, and treat the semi-finished steel to yield its final
marketable condition.
                                               2-4

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Iron Ore      Coke
                                                           Flux
                                  I
                                          Iron Making
                  Scrap
                                                  Pig Iron
           Steel Making
Flux
                                                  Molten Steel
                                            Forming
                                                  Semi-Finished Steel
                                           Finishing
                                                  Finished Steel Products
  Figure 2-1. Overview of the Integrated Steel Making Process
2.1.1   Iron Making

       Blast furnaces are the primary site of iron making at integrated facilities where iron ore is
converted into more pure and uniform iron.  Blast furnaces are tall steel vessels lined with heat-resistant
brick (AISI, 1989a). They range in size from 23 to 45 feet in diameter and are over 100 feet tall (Hogan
and Koelble, 1996; Lankford et al., 1985). Conveyor systems of carts and ladles carry inputs and
outputs to and from the blast furnace.

       Iron ore, coke, and flux are the primary inputs to the iron making process.  Iron ore, which is
typically 50 to 70 percent iron, is the primary source of iron for integrated iron and steel mills. Pellets
are the primary source of iron ore used in iron making at integrated steel mills. Iron can also be
                                             2-5

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captured by sintering from fine grains, pollution control dust, and sludge. Sintering ignites these
materials and fuses them into cakes that are 52 to 60 percent iron. Other iron sources are scrap metal,
mill scale, and steel making slag that is 20 to 25 percent iron (Lankford et al., 1985).

       Coke is made in ovens that heat metallurgical coal to drive off gases, oil, and tar, which can be
collected by a coke by-product plant to use for other purposes or to sell.  Coke may be generated by an
integrated iron and steel facility or purchased from a merchant coke producer.  Iron makers are
exploring techniques that directly use coal to make iron, thereby eliminating the need to first make coke.
Coke production is responsible for 72 percent of the particulates released in the manufacture of steel
products (Prabhu and Cilione, 1992).

       Flux is a general name for  any material used in the iron or steel making process that is used to
collect impurities from molten metal. The most widely used flux is lime. Limestone is  also directly
used as a flux, but it reacts more slowly than lime (Fenton, 1996).

       Figure 2-2 shows the iron making process at blast furnaces. Once the blast furnace is fired up, it
runs continuously until the lining is worn away.  Coke, iron materials, and flux are charged into the top
of the furnace. Hot air is forced into the  furnace from the bottom. The hot air ignites the coke, which
provides the fuel to  melt the iron.  As the iron ore melts, chemical reactions occur. Coke releases
carbon as it burns, which combines with  the iron. Carbon bonds with oxygen in the iron ore to reduce
the  iron oxide to pure iron. The bonded carbon and oxygen leave the molten iron in the form of carbon
monoxide, which is the blast furnace gas. Some of the carbon remains in the iron. Carbon is an
important component of iron and steel, because it allows iron and steel to harden when they are cooled
rapidly.

       Flux combines with the impurities in molten iron to form slag. Slag separates from the molten
iron and rises to the surface.  A tap removes the slag from the iron while molten iron, called hot metal, is
removed from a different tap at 2,800 to  3,000°F. Producing a metric ton of iron from a blast furnace
requires 1.7 metric tons of iron ore, 450 to 650 kilograms of coke, 250 kilograms of flux, and 1.6 to 2.0
metric tons of air (Lankford et al., 1985).

       Hot metal may be transferred directly to steel making furnaces.  Hot metal that has cooled and
solidified is called pig iron. Pig iron is at least 90 percent iron and 3 to 5 percent carbon (Lankford et
al.,  1985).  Pig iron  is typically used in steel making furnaces, but it also may be cast for sale as
                                               2-6

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                  Coke
                                                                                 Dust
                Coal or
             natural gas
                                                     Pig Iron
Figure 2-2. Iron Making Process:  Blast Furnace

Source: U.S. Environmental Protection Agency, Office of Compliance. 1995. EPA Office of Compliance Sector Notebook
       Project: Profile of the Iron and Steel Industry. Washington, DC: Environmental Protection Agency.
merchant pig iron. Merchant pig iron may be used by foundries or electric arc furnace (EAF) facilities
that do not have iron making capabilities. In 1997, blast furnaces in the United States produced
54.7 million short tons of iron, of which  1.2 percent was sold for use outside of integrated iron and steel
mills. Six thousand tons of pig iron were used for purposes other than steel making (AISI, 1998).

2.7.2  Steel Making

       Steel making is carried out in basic oxygen furnaces or in EAFs, while iron making is only
carried out in blast furnaces. Basic oxygen furnaces are the standard steel making furnace used at
integrated mills, although two facilities use EAFs. EAFs are the standard furnace at mini-mills since
they use scrap metal efficiently on a small scale. Open hearth furnaces were used to produce steel prior
to 1991 but have not been used in the United States since that time.
                                                2-7

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       Hot metal or pig iron is the primary input to the steel making process at integrated mills.  Hot
metal accounts for up to 80 percent of the iron charged into a steel making furnace (AISI, 1989a). Scrap
metal is also used, which either comes as wastes from other mill activities or is purchased on the scrap
metal market. Scrap metal must be carefully sorted to control the alloy content of the steel.
Direct-reduced iron (DRI) may also be used to increase iron content, particularly in EAFs that use
mainly scrap metal for the iron source.  DRI is iron that has been formed from iron ore by a chemical
process, directly removing oxygen atoms from the iron oxide molecules.

       Predictions for iron sources for basic oxygen furnaces in the year 2004 indicate an expected
decrease in the use of pig iron and expected increases in the use of scrap and DRI. Shares for basic
oxygen furnaces in 2004 are predicted to be 67 percent pig iron, 27 percent scrap, and 6 percent DRI. In
contrast, shares  for EAFs in 2004 are predicted to be 2 percent pig iron, 88 percent scrap, and 10 percent
DRI (Dun & Bradstreet, 1998).

       Figure 2-3 shows the steel making process at basic oxygen furnaces and EAFs. At basic oxygen
furnaces, hot metal and other iron sources are charged into the furnace.  An oxygen lance is lowered into
the furnace to inject high purity oxygen—99.5 to 99.8 percent pure—to minimize the introduction of
contaminants. Some basic oxygen furnaces insert the oxygen from below. Energy for the melting of
scrap and cooled pig iron comes from the oxidation of silicon, carbon, manganese, and phosphorous.
Flux is added to collect the oxides produced in the form of slag and to reduce the levels of sulfur and
phosphorous in  the metal.  Approximately 365 kilograms of lime are needed to produce a metric ton of
steel (AISI, 1989a). The basic oxygen process can produce approximately 300 tons in 45 minutes
(AISI, 1989a).  When the process is complete, the furnace is tipped and the molten steel flows out of a
tap into a ladle.

       EAFs have removable roofs so that  they can be charged from the top. EAFs primarily use scrap
metal for the iron source, but alloys may also  be added before the melt.  In EAFs, electric arcs are
formed between two or three carbon electrodes. The EAFs require a power source to supply the charge
necessary to generate the electric arc and typically use electricity purchased from an outside source.  If
electrodes are aligned so that the current passes above the metal, the metal is heated by radiation from
the arc.  If the electrodes are aligned so that the current passes through the metal, heat is generated by
the resistance of the metal in addition to the arc radiation. Flux is blown or deposited on top  of the
metal after it
                                              2-8

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                                                      Basic Oxygen Furnace
                      Air


                   Scrap


                    Flux


                    Iron
                      Air


                   Scrap


               Electricity
                                                                                 Molten
                                                                                  Steel
                                                              Electric Arc Furnace
Figure 2-3.  Steel Making Processes: Basic Oxygen Furnace and Electric Arc Furnace

Source: U.S. Environmental Protection Agency, Office of Compliance.  1995. EPA Office of Compliance Sector Notebook
       Project: Profile of the Iron and Steel Industry. Washington, DC:  Environmental Protection Agency.
                                                 2-9

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has melted.  Impurities are oxidized by the air in the furnace and oxygen injections. The melted steel
should have a carbon content of 0.15 to 0.25 percent greater than desired because the excess will escape
as carbon monoxide as the steel boils.  The boiling action stirs the steel to give it a uniform composition.
When complete, the furnace is tilted so that the molten steel can be drained through a tap.  The slag may
be removed from a separate tap. The EAF process takes 2 to 3 hours to complete (EPA, 1995).

       Steel often undergoes additional, referred to as secondary, metallurgical processes after it is
removed from the steel making furnace. Secondary steel making takes place in vessels, smaller
furnaces, or the ladle.  These sites do not have to be as strong  as the primary refining furnaces because
they are not required to contain the  powerful primary processes. Secondary steel making can have many
purposes, such as removal of oxygen, sulfur, hydrogen, and other gases by exposing the steel to a
low-pressure environment; removal of carbon monoxide through the use of deoxidizers such as
aluminum, titanium, and silicon; and changing of the composition of unremovable substances such as
oxides to further improve mechanical properties.

       Molten steel transferred directly from the steel making furnace is the primary input to the
forming process. Forming must be done quickly before the molten steel begins to cool and solidify.
Two generalized methods are used to shape the molten steel into a solid form for use at finishing mills:
ingot casting and continuous casting machines (Figure 2-4). Ingot casting is the traditional method of
forming molten steel in which the metal is poured into ingot molds and allowed to cool and solidify.
However, continuous casting currently accounts for approximately 95 percent of forming operations
(AISI,  1998). Continuous casting, in which the steel is cast directly into a moving mold on a machine,
reduces loss of steel in processing up to 12 percent over ingot pouring (USGS, 1998). Continuous
casting is projected to account for nearly 100 percent of steel mill casting by the year 2004 (Dun &
Bradstreet, 1998).

2.1.3  Types of Steel Mill Products

       Carbon steel is the most common type of steel by metallurgical content (see Figure 2-5). By
definition, for a metal to be steel it must contain carbon in addition to iron. Increases in carbon content
increase the hardness, tensile strength, and yield strength of steel but can also make steel susceptible to
cracking. Alloy steel is the general name for the wide variety of steels that manipulate alloy content for
a specific group of attributes. Alloy steel does not have strict  alloy limits but does have desirable
                                              2-10

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                                 Molten Steel
                                                                       ->• Process Water
                                                                       ->• Scale
                             Ingot Casting
 |O O O|
Continuous Casting
                                              Semi-Finished Steel
Figure 2-4. Steel Casting Processes: Ingot Casting and Continuous Casting

Source: U.S. Environmental Protection Agency, Office of Compliance. 1995. EPA Office of Compliance Sector Notebook
       Project: Profile of the Iron and Steel Industry. Washington, DC: Environmental Protection Agency.
ranges.  Some of the common alloy materials are manganese, phosphorous, and copper. Stainless steel
must have a specific mix of at least 10 percent chromium and 50 percent iron content (AISI, 1989b).

       Semi-finished steel forms from the casting process are passed through processing lines at
finishing mills to give the steel its final shape (Figure 2-6). At rolling mills, steel slabs are flattened or
rolled into pipes. At hot strip mills, slabs pass between rollers until they have reached the desired
thickness. The slabs may then be cold rolled in cold reduction mills. Cold reduction, which applies
greater pressure than the hot rolling process, improves mechanical properties, machinability, and size
accuracy, and produces thinner gauges than
                                               2-11

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                              U.S. Steel Mill Product Shipments
                                     109.1 million net tons
                    Stainless
                       2%
                                                                 Carbon
                                                                   93%
Figure 2-5. U.S. Steel Mill Product Shipments by Type of Steel: 2000

Source: American Iron and Steel Institute (AISI). 2002. AISI Statistics, . As obtained August
       2002.


possible with hot rolling alone. Cold reduction is often used to produce wires, tubes, sheet and strip
steel products.

       After the shape and surface quality of steel have been refined at finishing mills, the metal often
undergoes further processes for cleansing.  Pressurized air or water and cleaning agents are the first step
in cleansing.  Acid baths during the pickling process remove rust, scales from processing, and other
materials. The cleaning and pickling processes help coatings to adhere to the steel. Metallic coatings
are frequently applied to sheet and strip to inhibit corrosion and oxidation, and to improve visual
appearance. The most common coating is galvanizing, which is a zinc coating. Other coatings include
aluminum, tin, chromium, and lead.  Semi-finished products are also finished into pipes and tubes.
Pipes are produced by piercing a rod of steel to create a pipe with no seam or by rolling and welding
sheet metal.

       Slag is generated by iron and steel making.  Slag contains the impurities of the molten metal, but
it can be sintered to capture the iron content. Slag can also be sold for use by the  cement industry, for
railroad ballast, and by the construction industry, although steel making slag is not used for these
purposes as often as iron making slag (EPA, 1995).
                                               2-12

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                                                                  SOME PRODUCT FORMS(NOT TO SAME SCALE)
                                STRUCTURAL
                                  MILLS
                                          STRUCTURAL SHAPES
RAIL
MILLS
RAILS «ND JOINT BARS

ROD
MILLS
RODS

WIRE
MILLS
SKELP
MILLS
SKELP

CONTINUOUS
BUTT-WELD
PIPE MILL
                                                            STANDARD RAILS
                                                                       ANGLES   TEES    ZEES  CHANNELS    PILING
                                                                           CRANE RAILS      JOINT BARS
                                                                                                  <&•
                                                          SOUND  SQUARE  HEKASONAL OCTAGONAL   FLAT   TRIANGULAR  HALF ROUDO
SEAMLESS
TUBE MILLS

1
                                                HOT-ROLLED SHEETS AND STUiP
HOT-KOLLEO
^BREAKDOWNS .
N COIL FORM
COLD
REDUCTION
MILLS
COLD-ROLLED SHEETS
AND STRIP'
(IKCL. BLACK PLATE)
                                                                                   NOT£ OTHER TUBULAg PRODUCTS INCLUDE
                                                                                      ELECTRIC-WELDED LARGE-DIAMETER
                                                                                      PIPE MADE FRO* PLATES. AND
                                                                                      ELECTRIC RESISTANCE-HELDEO leR»>
                                                                                      PIPE MADE FROU HOT-ROILED ANO
                                                                                      COLO-BOLLEO STRIP.
Figure 2-6. Steel Finishing Processes by Mill Type

Source:  Lankford, William T., Norman L. Samways, Robert F. Craven, and Harold E. McGannon, eds. 1985.  The Making,
        Shaping and Treating of Steel. Pittsburgh: United States Steel, Herbick & Held.
2.1.4   Emissions

        Emissions are generated from numerous points throughout the integrated steel mill production
processes.  Blast furnace gas, such as carbon monoxide, is often used to heat the air incoming to the
blast furnace and can also be used as fuel if it is first cleaned. The iron making process often generates
other gases from impurities such as sulfur dioxide or hydrogen sulfide.

        Particulates may be included in the blast furnace gas.  The steel making process also generates
gases that typically contain metallic dust such as iron particulates, zinc, and lead. In addition, when the
steel is poured, fumes are released that contain iron oxide and graphite. Air filters and wet scrubbers of
emissions generate dust and sludge.
                                                   2-13

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       About a thousand gallons of water are used per ton of steel to cleanse emissions (EPA, 1995).
The water used to cool and rinse the steel picks up lubricants, cleansers, mill scale, and acids.  A sludge
may form that contains metals such as cadmium, chromium, and lead.
2.2    Industry Organization

2.2.1   Iron and Steel Making Facilities

       As of 2000, twenty integrated steel plants operated in the United States (see Figure 2-7).  Five
facilities are located in Ohio, four are in Indiana, two each are in Illinois, Alabama, and Michigan, and
one each is in Kentucky, Maryland, Utah, Pennsylvania, and West Virginia. However, four of these
plants ceased operations in late 2000 and early 2001. Recently, International Steel Group (ISG)
purchased LTV assets and these two plants reportedly plan to re-open their operations in 2002.

       EPA developed a baseline data set for the economic model that characterized baseline coke, iron
and steel making operations in the year 2000 (see Table 2-1). The sources of these data include
information the 1997 ICR and updates (EPA, 1998a and 1998b), recent 10-K and annual reports for
parent companies, and publicly available USITC publications. As shown,  twenty steel making facilities
have basic oxygen furnaces, while only two facilities have EAFs: Inland Steel and Rouge Steel. Total
basic oxygen capacity at integrated mills is approximately 61 million tons per year, while the EAF
capacity is only 1.5 million tons per year.

       Since 1995, total domestic steel making capacity (basic oxygen process and electric) has
consistently increased (see Table 2-2).  However, total capacity fell in 2001 with utilization rates
reaching a ten year low of 79.2 percent.  Declining economic conditions in the United States coupled
with strong import competition contributed to this decline.

2.2.2   Companies

       Companies that own integrated iron and steel plants are legal business entities that have the
capacity to conduct business transactions and make business decisions  that affect the facility. As shown
in Table 2-3, 14 parent companies own the 20 U.S. integrated iron and  steel plants operating in 2000.
Total revenues for these  companies range from
                                              2-14

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Figure 2-7. Location of U.S. Integrated Iron and Steel Manufacturing Plants: 2000

Source: Association of Iron and Steel Engineers (AISE). 1998. 1998 Directory Iron and Steel Plants. Pittsburgh, PA:
       AISE.
$100 million to $40 billion, with an average of $5.7 billion (see Table 2-4). According to the Small
Business Administration's (SBA's) criterion (e.g., fewer than 1,000 employees), none of the companies
owning integrated iron and steel plants are classified as small businesses.

       Many of the companies that own integrated mills own multiple facilities, indicating horizontal
integration.  Some companies also have additional vertical integration. Companies may own service
centers to distribute their steel products, or coal and iron ore mines and transportation operations to
capture the early stages of steel production. For example, Bethlehem Steel owns BethForge, which
manufactures forged steel and cast  iron products, and BethShip, which services ships and fabricates
some industrial products.
                                              2-15

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        Table 2-1.  Baseline Data for Integrated Iron and Steel Mills:  2000
Facility Name
Acme Steel Company
AK Steel
AK Steel
Bethlehem Steelc
Bethlehem Steel
Geneva Steel
Gulf States Steel
Inland Steel
LTV Steel


LTV Steel


National Steel
National Steel
Rouge Steel
USX
USX
USX
USS/Kobe Steel
WCI Steel
Weirton Steel
Wheeling-Pittsburgh
Total
Location
Riverdale, ILb
Ashland, KY
Middletown, OH
Burns Harbor, IN
Sparrows Pt, MD
Orem, UT
Gadsden, AL
East Chicago, IN
Cleveland, OH"


East Chicago, IN"


Granite City, IL
Ecorse, MI
Dearborn, MI
Braddock, PAe
Fan-field, AL
Gary, IN
Lorain, OH
Warren, OH
Weirton, WV
Mingo Junction, OHf

Iron Making
1997
Capacity
1,000,000
2,000,000
2,300,000
4,960,000
3,100,000
2,628,000
1,100,000
NA
4,270,000


3,320,000


2,495,000
3,440,000
2,934,600
2,300,000
2,190,000
7,240,000
2,236,500
1,460,000
2,700,000
2,152,800
53,826,900
Steel Making
1997 Capacity
Basic Oxygen
Process Electric
1,200,000 —
2,100,000 —
2,640,000 —
5,600,000 —
3,375,000 —
2,700,000 —
1,400,000 —
NA 600,000
6,400,000 —


3,800,000 —


3,300,000 —
3,600,000 —
3,300,000 850,000
2,957,000 —
2,240,000 —
8,730,000 —
NA —
2,040,000 —
3,000,000 —
2,400,000 —
60,782,000 1,450,000
2000 Steel
Mill
Products"
864,860
1,999,472
2,513,622
5,168,702
2,918,325
1,912,000
750,000
5,615,620
4,970,733


2,951,372


2,852,079
3,111,359
2,817,526
2,606,697
2,010,159
6,422,015
1,874,000
1,265,895
2,428,901
2,100,000
57,153,338
Coke Making
1997
Capacity
493,552
942,986
410,000
1,672,701
—
700,002
521,000
—
543,156


590,250


570,654
908,733
—
4,854,111
—
1,813,483
—
—
—
1,249,501
15,270,129
2000
Production"
484,725
703,982
306,084
1,248,747
—
522,583
513,546
—
—


440,648


426,019
678,411
—
4,731,105
—
1,353,848
—
—
—
1,234,752
12,644,450
2000 Total
Demand"
270,762
723,240
831,726
1,884,800
1,103,600
914,820
297,202
1,771,593
1,402,944


1,090,813


936,614
1,291,364
783,361
782,579
758,556
2,055,687
685,044
438,276
922,500
775,535
19,721,019

Current Status
Closed 2001


Chapter 11 bankruptcy — 2001
Chapter 11 bankruptcy — 2001
Chapter 1 1 bankruptcy — 2002
Closed late 2000

LTV ceased ops in late 2000;
however, ISO purchased and
operates in 2002
LTV ceased ops in late 2000;
however, ISO purchased and
operates in 2002
Chapter 1 1 bankruptcy — 2002
Chapter 1 1 bankruptcy — 2002




Chapter 11 bankruptcy — 2001


Chapter 1 1 bankruptcy — 2000

to
K^
ON
                                                                                                     Includes coke facilities at Warren, OH.
                                                                                                     Includes coke facilities at Clairton, PA.
                                                                                                     Includes coke facilities at Follansbee, WV.
                                                                                                   NA = not available.
    EPA estimates using selected 10K, 10K405, 10Q, and Annual Reports. The data were
    supplemented with market data from AISI (2002) and USITC (2001)
    Includes coke facilities at Chicago, IL.
    Bethlehem facility at Lackwanna, NY, not included.  It has two coke batteries with coke-
    making capacity and production of 747,686 tons per year and a cold reduction mill.
Sources:   Association of Iron and Steel Engineers (AISE).  1998. 1998 Directory Iron and Steel Plants.  Pittsburgh, PA: AISE.
          U.S. Environmental Protection Agency (EPA). 1998b. Update of Integrated Iron and Steel Industry Responses to Information Collection Request (ICR) Survey.  Database
          prepared for EPA's Office of Air Quality Planning and Standards.  Research Triangle Park, NC: Environmental Protection Agency.

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Table 2-2.  U.S. Steel Making Capacity and Utilization:  1981-2001

                       Total Capacity(106) (net short tons)          Capacity Utilization (%)

        1990                       116.7                                 84.7
        1991                       117.6                                 74.7
        1992                       113.1                                 82.2

        1993                       109.9                                 89.1
        1994                       108.2                                 93.0

        1995                       112.4                                 93.3

        1996                       116.1                                 90.7
        1997                       121.4                                 89.4

        1998                       125.3                                 86.8
        1999                       128.2                                 83.8

        2000                       130.4                                 86.1
	2001	125.4	79.2	

Source: American Iron and Steel Institute (AISI). 1991.  Annual Statistical Report. Washington, DC: American Iron and
       Steel Institute.
       American Iron and Steel Institute (AISI). 1998.  Annual Statistical Report. Washington, DC: American Iron and
       Steel Institute.
       American Iron and Steel Institute (AISI). 2002.  AISI Statistics, . As obtained August
       2002.
2.2.2.1 Profitability

       The Agency collected additional 2000 financial data for affected domestic companies from
publicly available financial statements. Although three of these firms (National Steel, U.S. Steel Group,
and Ispat Inland, Inc.) are owned by another parent company, we used 10-K data for these subsidiaries
to examine the profitability of domestic operations.  We found that in the baseline year of the analysis,
only five of these companies reported positive operating income.  Of the remaining firms nine firms
with negative operating income data, three have subsequently closed (Acme Steel, Gulf States Steel, and
LTV Corporation1). Five (Bethlehem Steel, Geneva Steel, National Steel Group, Republic
Technologies, and WHX Corporation) companies have filed voluntary petitions for relief under Chapter
11 of the U.S.
    'International Steel Group (ISO) announced plans to open LTV's plants in 2002.

                                                2-17

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        Table 2-3.  Baseline Data for U.S. Integrated Iron and Steel Mills By Parent Company:  2000
Parent Company Name
Acme Metals Inc.
AK Steel Corporation
Bethlehem Steel Corporation
Geneva Steel Company
HMK Enterprises Inc.
Inland Steel Industries Inc.
LTV Corporation
National Steel Corporation
Renco Group Inc.
Rouge Industries Inc.
USS/KOBE Steel Company
USX Corporation
Weirton Steel Corporation
WHX Corporation
Total
Iron Making
1997 Capacity
1,000,000
4,300,000
8,060,000
2,628,000
1,100,000
NA
7,590,000
5,935,000
2,934,600
2,236,500
11,730,000
1,460,000
2,700,000
2,152,800
53,826,900
Steel Making
1997 Capacity
Basic Oxygen Process Electric
1,200,000 —
4,740,000 —
8,975,000 —
2,700,000 —
1,400,000 —
NA 600,000
10,200,000 —
6,900,000 —
3,300,000 850,000
NA —
13,927,000 —
2,040,000 —
3,000,000 —
2,400,000 —
60,782,000 1,450,000
2000 Steel Mill
Products"
864,860
4,513,093
8,087,027
1,912,000
750,000
5,615,620
7,922,105
5,963,439
2,817,526
1,874,000
11,038,871
1,265,895
2,428,901
2,100,000
57,153,338
Coke Making
1997 Capacity
493,552
1,352,986
1,672,701
700,002
521,000
—
1,133,406
1,479,387
—
—
6,667,594
—
—
1,249,501
15,270,129
2000 Production"
484,725
1,010,066
1,248,747
522,583
513,546
—
440,648
1,104,430
—
—
6,084,953
—
—
1,234,752
12,644,450
2000 Total Demand"
270,762
1,554,966
2,988,400
914,820
297,202
1,771,593
2,493,757
2,227,978
783,361
685,044
3,596,823
438,276
922,500
775,535
19,721,019
to
K^
oo
              EPA estimates using selected 10K, 10K405, 10Q, and Annual Reports. The data were

              supplemented with market data from AISI (2002) and USITC (2001)

              Includes coke facilities at Chicago, IL.
Includes coke facilities at Warren, OH.

Includes coke facilities at Clairton, PA.

Includes coke facilities at Follansbee, WV.
              Bethlehem facility at Lackwanna, NY, not included. It has two coke batteries with coke-        NA = not available.
              making capacity and production of 747,686 tons per year and a cold reduction mill.             NA = not available.
        Sources:  Association of Iron and Steel Engineers (AISE). 1998. 1998 Directory Iron and Steel Plants. Pittsburgh, PA: AISE.
                 U.S. Environmental Protection Agency (EPA). 1998b. Update of Integrated Iron and Steel Industry Responses to Information Collection Request (ICR) Survey.  Database
                 prepared for EPA's Office of Air Quality Planning and Standards.  Research Triangle Park, NC: Environmental Protection Agency.

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Table 2-4. Sales, Operating Income, and Profit Rate for Integrated Producers: 2000

Acme Metals Inc.
AK Steel Holding Corporation
Bethlehem Steel Corporation
Geneva Steel Company
Gulf States Steela
Ispat International N.V.
Ispat Inland Inc.
LTV Corporation
NKK Corporation
National Steel Group
Rouge Industries, Inc.
Republic Technologies
USX-Corporation
USX-U.S. Steel Group
WCI Steel Inc.
Weirton Steel Corporation
WHX Corporation
Total
Revenue
($106)
$501
$4,611
$4,197
$564
$101
$5,097
$2,305
$4,934
$14,148
$2,979
$1,100
$1,265
$39,914
$6,132
$561
$1,117
$1,745
Operating
Income
($106)
-$13
$338
-$95
-$10
-$2
$315
$51
-$177
$638
-$117
-$167
-$152
$8,456
$339
$34
-$42
$5
Operating
Margin
($106)
-2.6%
7.3%
-2.3%
-1.8%
-1.5%
6.2%
2.2%
-3.6%
4.5%
-3.9%
-15.2%
-12.0%
21.2%
5.5%
6.1%
-3.8%
0.3%
Net Income
($106)
-$43
$132
-$118
-$9
-$4
$99
-$33
-$868
$768
-$130
-$117
-$287
$411
-$21
$10
-$85
-$181
Return on
Sales
($106)
-8.6%
2.9%
-2.8%
-1.6%
^1.2%
1.9%
-1.4%
-17.6%
5.4%
^1.4%
-10.7%
-22.7%
1.0%
-0.3%
1.8%
-7.6%
-10.4%
Status
Closed 2001
Operating
Chapter 1 1
Bankruptcy — 2001
Chapter 1 1
Bankruptcy — 2002
Closed late 2000
Operating
Operating
LTV ceased ops in late
2000; however, ISO
prchased and operates in
2002
Operating
Chapter 1 1
Bankruptcy — 2002
Operating
Chapter 1 1
Bankruptcy— 2001
Operating
Operating
Operating
Operating
Chapter 1 1
Bankruptcy— 2000
a  January through April 30, 2000.

Source: Hoover's Online.
       Selected 10-K, 10-K405, 10-Q and Annual Reports.
                                               2-19

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Bankruptcy Code since December 2000. Although these filings do not necessarily imply closure, they
provide an indicator of financial stress that currently exists among integrated iron and steel producers.
       Based on industry financial statistics published by AISI, the average operating margin for the
domestic steel segment between 1998 and 2001 is 2.5 percent. As shown in Table 2-5, profit margins
for the industry fell to there lowest levels in 2000 (0.9 percent). This is coincided with a 6.2 percent
increase in foreign steel imports that occurred between 1999 and 2000. However, preliminary data for
2001 show operating margins increasing to 7.8 percent in 2001 (AISI, 2002).
Table 2-5. Operating Margins for the Domestic Steel Industry:  1998-2000 ($106)

1998
1999
2000
2001
Totals
Total Sales
$35,310
$36,408
$38,677
$31,295
$141,690
Operating Income
$353
$367
$366
$2,440
$3,526
Operating Margin
1.0%
1.0%
0.9%
7.8%
2.5%
Source: American Iron and Steel Institute (AISI). 2002. AISI Statistics, . As obtained August
       2002.

2.3    Uses and Consumers

       Automotive and construction industries are the two largest demanders of finished steel products,
consuming 15 percent and 19 percent, respectively, of total net shipments in 2000 (see Figure 2-8).
Although service centers are the single largest market group represented in Figure 2-8, they are not a
single end user group because they represent businesses that buy steel mill products at wholesale and
then resell them. We provide additional historical data on shipments by end use in Table 2-6.

       Steel mill products are used for large automobile parts, such as body panels. One technique by
steel makers is the use of high strength steel to address the automobile industry's need for lighter
vehicles to achieve fuel efficiency gains. High strength steels are harder than the alloy steels
traditionally used in the industry, meaning that less mass is necessary to build the same size vehicle. An
Ultralight Steel Auto Body has recently been designed that has a 36 percent decrease in mass from a
standard  frame (Steel Alliance, 1998).
                                              2-20

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                                               2000
                                      109.1 million net tons
                           All Other
                             36%
                                                          Service Centers
                                                               28%
                                                                Machinery Excluding
                                                                     Agriculture
                                                                        4%

                                         ,^^^^                 Containers
                            Construction ~^^^^^^\            3 Q%
                                19%
                                                       Automotive
                                                          15%

Figure 2-8. 2000 U.S. Steel Shipments: Selected Markets

Source: American Iron and Steel Institute (AISI). 1998. Annual Statistical Report. Washington, DC: American Iron and
       Steel Institute.
       American Iron and Steel Institute (AISI). 2002. AISI Statistics, . As obtained August
       2002.
Drawbacks are that the harder steels require additional processing to achieve a thin gauge, and
manufacturing with high strength steels demands more care and effort due to the low levels of ductility
(Autosteel, 1998a).

       Steel makes up 95 percent of all metal used for structural purposes (Furukawa, 1998).
High-strength low-alloy steels are increasingly used to construct bridges and towers because they are
lighter than standard carbon. As a result, builders can use smaller sections, thus reducing wind
resistance and allowing for easier construction. Steel use by construction has traditionally been limited
to commercial construction, but as wood prices rise and wood quality drops with decreased available
timber, steel mill products are gaining an increasing share of the residential housing market.

       Because steel is used for such diverse products, there are numerous possible substitutes for it.  In
Table 2-7, alloy and carbon steel are compared to some possible substitutes. The density of both steels
is greater than any of the substitutes, leading to greater weight. The cost per ton of all substitute
materials is much higher than steel, except for wood and reinforced concrete. In addition, total annual
production of the top three possible
                                               2-21

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Table 2-6. Net Shipments of Steel Mill Products by Consumer Type:  1981-1997 (103 short tons)
Oil and Machinery and Service
Year
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
to 1994
to 1995
1996
1997
Automotive
13,154
9,288
12,320
12,882
12,950
11,889
11,343
12,555
11,763
11,100
10,015
11,092
12,719
14,753
14,622
14,665
15,251
Construction
11,676
8,570
9,974
10,153
11,230
10,614
11,018
12,102
11,500
12,115
11,467
12,230
13,429
14,283
14,892
15,561
15,885
Appliances
1,775
1,337
1,618
1,635
1,466
1,648
1,633
1,638
1,721
1,540
1,388
1,503
1,592
1,736
1,589
1,713
1,635
Containers
5,292
4,470
4,532
4,352
4,089
4,113
4,372
4,421
4,459
4,474
4,278
3,974
4,355
4,495
4,139
4,101
4,163
Gas
6,238
2,745
1,296
2,003
2,044
1,023
1,489
1,477
1,203
1,892
1,425
1,454
1,526
1,703
2,643
3,254
3,811
Average Annual Growth
1981-1997
1981-1989
1989-1997
1.0%
-1.3%
3.7%
2.3%
-0.2%
4.8%
-0.5%
-0.4%
-0.6%
-1.3%
-2.0%
-0.8%
-2.4%
-10.1%
27.1%
Electricity
7,224
4,587
4,821
5,251
4,140
4,189
4,650
5,257
4,858
4,841
4,084
4,087
4,404
4,726
4,707
4,811
4,789
Rates
-2.1%
-4.1%
-0.2%
Centers
17,637
13,067
16,710
18,364
18,439
17,478
19,840
21,037
20,769
21,111
19,464
21,328
23,714
24,153
23,751
27,124
27,800

3.6%
2.2%
4.2%
Converting
5,058
3,222
4,403
5,136
5,484
5,635
7,195
8,792
8,235
9,441
8,265
9,226
9,451
10,502
10,440
10,245
11,263

7.7%
7.9%
4.6%
Exports
1,845
832
544
428
494
495
515
1,233
3,183
2,487
4,476
2,650
2,110
1,710
4,442
2,328
2,610

2.6%
9.1%
-2.3%
All Other3
18,551
13,449
11,366
13,535
12,707
13,179
14,599
15,328
16,409
15,980
13,984
14,697
15,722
17,023
16,269
17,076
18,651

0.0%
-1.4%
1.7%
Total
88,450
61,567
67,584
73,739
73,043
70,263
76,654
83,840
84,100
84,981
78,846
82,241
89,022
95,084
97,494
100,878
105,858

1.2%
-0.6%
3.2%
a  "All Other" includes rail transportation, aircraft and aerospace, shipbuilding, mining, agriculture, and nonclassified shipments.

Sources: American Iron and Steel Institute (AISI). 1991. Annual Statistical Report. Washington, DC: American Iron and Steel Institute.
        American Iron and Steel Institute (AISI). 1993. Annual Statistical Report. Washington, DC: American Iron and Steel Institute.
        American Iron and Steel Institute (AISI). 1998. Annual Statistical Report. Washington, DC: American Iron and Steel Institute.

-------
Table 2-7. Comparison of Steel and Substitutes by Cost, Strength, and Availability

Reinforced concrete
Wood
Alloy steel
Carbon steel
Aluminum alloy
Magnesium alloy
Titanium alloy
Glass-fiber reinforced plastic
Carbon-fiber reinforced plastic
Yield
Strength
MN/m2
50
70
1,000
220
1,300
140
800
200
600
Density
Mg/m3
2.5
0.55
7.87
7.87
2.7
1.74
4.5
1.8
1.5
Cost $/metric
ton
40
400
826
385 to 600
3,500
3,200
18,750
3,900
113,000
Absolute
Production
Weight
(106 tons/yr)
500
69
86.2 (all steel)
a
3.8
0.13
0.06
NA
NA
Absolute
Production
Volume
(106 mVyr)
200
125
11 (all steel)
a
1.4
0.07
0.01
NA
NA
a Production of carbon steel included with alloy steel.
NA = not available

Source: Paxton, H.W., and AJ. DeArdo.  January 1997. "Steel vs. Aluminum, Plastic, and the Rest." New Steel.

replacements (aluminum, magnesium, and titanium) is only 4 million tons, less than 5 percent of steel's
annual production. Thus, the threat of major replacement by substitutes is low (Paxton and DeArdo,
1997).

2.4    Market Data

       The average annual production growth rate for steel mill products for the period 1990 and 2001
is approximately 1.5 percent (see Table 2-8). However, production declined sharply in 2001 (9.3
percent) as a result of declining economic conditions in the United States and import competition.  In
2000, domestic steel producers supplied 105 million net tons of steel mill products.  EPA estimates just
over half of this output was produced by integrated steel mills. AISI also reports steel mill product
shipments by type of product. Using 1997 data, sheet and strip is the largest single product category
followed by bars and structural shapes (see Table 2-9).

       Exports and imports grew at roughly 7.0 percent during this period and domestic consumption
grew at an annual rate of 2.4 percent. Export ratios show that 6-8 percent of
                                              2-23

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Table 2-8. U.S. Production, Foreign Trade, and Apparent Consumption of Steel Mill Products:
1981-2001 (103 short tons)

1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001

1990-2001
Production3
84,981
78,846
82,241
89,022
95,084
97,494
100,878
105,858
102,420
106,021
109,050
98,940

1.5%
Exports
4,303
6,346
4,288
3,968
3,826
7,080
5,031
6,036
5,520
5,426
6,529
6,144
Average Annual
7.7%
Imports
17,169
15,845
17,075
19,501
30,066
24,409
29,164
31,157
41,520
35,731
37,957
30,080
Growth Rates
7.3%
Apparent
Consumption1"
97,847
88,345
95,028
104,555
121,324
114,823
125,011
130,979
138,420
136,326
140,478
122,876

2.4%
a  Measured as net shipments, which are total production minus intracompany transfers.
b  Equals U.S. production minus exports plus imports.

Sources: American Iron and Steel Institute (AISI). 1993. Annual Statistical Report. Washington, DC: American Iron and
        Steel Institute.
        American Iron and Steel Institute (AISI). 1998. Annual Statistical Report. Washington, DC: American Iron and
        Steel Institute.
        American Iron and Steel Institute (AISI). 2002. AISI Statistics, . As obtained
        August 2002.
domestic production is sold overseas (see Table 2-10). This ratio has remained relatively flat over the
past 10 years. In contrast, import ratios have consistently been increasing over the past decade as
imports represent a significant share of U.S. consumption.  Since 1994, imports have accounted for
approximately one-quarter of U.S. apparent consumption.

       EPA estimated the average price for steel mill products using value of shipment data and output
quantities reported in the U.S. Census Bureau's Current Industrial Report for Steel Mill products. In
2000, the CIR reports  approximately 125,500 short tons of steel mill products were shipped at a value of
$61.4 billion (U.S. Bureau of Census, 2001). This
                                                2-24

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Table 2-9.  U.S. Production, Foreign Trade, and Apparent Consumption of Steel Mill Products:
1997 (tons)
Product
Semi-finished
Structural Shapes and Plate
Rail and Track
Bars
Tool Steel
Pipe and Tube
Wire-drawn
Tin Mill
Sheet and Strip
Production3
7,927,145
14,883,805
874,648
18,708,680
63,465
6,547,953
619,070
4,058,054
52,175,194
Exports
295,325
1,260,197
92,095
820,523
14,745
1,352,006
136,697
410,011
1,653,990
Imports
8,595,964
4,079,451
238,190
2,495,817
131,363
3,030,239
655,000
637,000
11,293,000
Apparent
Consumption15
16,227,784
17,703,059
1,020,743
20,383,974
180,083
8,226,186
1,137,373
4,285,043
61,814,204
a Reflects net shipments, which are total shipments minus intracompany transfers.
b Reflects U.S. production minus exports, plus imports.

Source: American Iron and Steel Institute (AISI). 1998. Annual Statistical Report. Washington, DC: American Iron and
       Steel Institute.
                                                  2-25

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Table 2-10.  Foreign Trade Concentration Ratios for U.S. Steel Mill Products:  1981-2001

1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
Export Concentration (%)
Ratioa
5.1
8.0
5.2
4.5
4.0
7.3
5.0
5.7
5.4
5.1
6.0
6.2
Import Concentration (%)
Ratiob
17.5
17.9
18.0
18.7
24.8
21.3
23.3
23.8
30.0
26.2
27.0
24.5
a   Measured as export share of U.S. production.
b   Measured as import share of U.S. apparent consumption.

Source: American Iron and Steel Institute (AISI).  1993. Annual Statistical Report. Washington, DC: American Iron and
       Steel Institute.
       American Iron and Steel Institute (AISI).  1998. Annual Statistical Report. Washington, DC: American Iron and
       Steel Institute.
       American Iron and Steel Institute (AISI).  2002. AISI Statistics, . As obtained August
       2002.
implies an average price of $489 per short ton. According to U.S. Bureau of Labor statistics, the price
of steel mill products has declined in recent years, falling nearly 20 percent since 1995 (U.S. BLS,
2002a)  (see Figure 2-9.)

2.5     Industry Trends

        Domestic integrated steelmakers have faced growing competition from minimills' whose share
of the steel market has increased steadily, rising from 15 percent in 1970 to about 50 percent in 2000.
This trend is expected to continue over the next decade (McGraw-Hill, 2000).

        Significant increases in the level of steel imports into the United States have also occurred over
the past 3 years.  In 1997, the U.S. imported 31.2 million tons of steel products in 1997 compared 38
million tons in 2000, and increase of 22 percent. The increase in imports coupled with declining
economic conditions led industry capacity utilization rates to fall from 89 to 79 percent in 2001.
Consequently, a variety of trade actions have been initiated by U.S. steel industry, Congress, and the
Executive branch. We provide a brief overview of selected measures below.
                                                2-26

-------
       The U.S. steel industry and unions have filed several petitions resulting in several antidumping
(AD) or countervailing duties (CD) measures. Members of the U.S. Congress have also attempted to
address the current trade situation through legislation, particularly the Steel Revitalization Act of 2001
(H.R. 808 and S. 957).2 The Act has a number of features:

       •   imposes quotas over the next five years that restrict imports to average monthly levels
          between July 1994 and June 1997
                  160
              g  140
              A
              a>
              a>
120
                  100
              £   80
               I
              £   60

                   40
                     1992    1993   1994   1995   1996   1997    1998   1999   2000   2001
                                                   Year
Figure 2-9.  Price Trends for Steel Mill Products: 1992 to 2001

Source: U.S. Department of Labor Statistics. Producer Price Index for Blast Furnaces and Steel Mills: PCU3312#. As
       obtained August 2, 2002a.
          institutes a steel import notification and monitoring program, which among other things,
          requires foreign steel exporters to report estimated pollution emissions and wages and
          benefits paid to the workers producing the goods.

          expands the emergency loan guarantee program

          imposes and excise tax up to 1.5 percent on steel products to create a health care cost
          assistance program for unemployed and retired steel employees of bankrupt firms.

          provides a grant program for steel firms that merge to subsidize cost of compliance
          associated with environmental regulation.
   2To date these measures have not been passed.
                                              2-27

-------
       In June 2001, the Administration requested a Section 201 investigation to determine if the steel
industry has been injured from imports.  After the investigation, the U.S. International Trade
Commission found the imports were a substantial cause of serious injury or threat of injury and
recommended a program of tariffs and tariff-rate quotas to the President. As a result, President Bush
announced tariffs and tariff rate quotas for selected steel mill products ranging from 8 to 30 percent.
                                               2-28

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                                             R-l

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