The Grey Chronicles

2008.July.16

Globalization of the Steel Industry


The 21-member Asia-Pacific Economic Cooperation, or APEC, was established in 1989 as the premier forum in the Asia-Pacific region for facilitating trade and investment and promoting economic cooperation and growth. From the start, APEC worked for tariff reduction and removal of other trade barriers across the Asia-Pacific region, creating more efficient domestic economies and dramatically increasing exports. All the ASEAN5 countries are members of APEC (APEC, 2005).

Furthermore, in 1992, the Philippines signed up for the ASEAN Free Trade Agreement (FTA). Later, either alone or as an ASEAN member, Philippines would sign additional FTAs with other countries, such as China, Japan or economic communities, e.g. European Union.

Then in 1995, the World Trade Organization was formally organized to deal with global rules of trade between 123 nations. The Philippines is signatory to this global compact (WTO, 2005).

According to Friedman (2005), the second era of globalization ended in 2000, accidentally the official year reckoned when NSC closed, where multinational companies changed the landscape and shrunk the world from medium to small despite the Great Depression, World Wars I & II and the Cold War. In 2000, the world has gone from small to tiny and for the first time, shaped by individuals instead of corporations. While the previous two eras were driven by Europe and America, this third era is being driven by non-Western, non-white countries such as China and India. In this new era, the ten flatteners—The Berlin Wall, Netscape, Work Flow Software, Open Sourcing, Outsourcing, Offshoring, Supply Chains, Insourcing, In-forming and The Steroids—began to converge, and thus, the world became flat.

With globalization in a flat world, new opportunities, challenges and partners are presented. The ‘highly cyclical and very competitive’ (Anwar, 2004) global steel industry, being one of the prime movers of the world’s economy, is neither immune nor reactive but rather oftentimes proactive in dealing with these three elements.

Laplace Conseil (2003).

Figure 7: Globalization of the Steel Market, Source: Laplace Conseil (2003).

Figure 7 illustrates the transformation of a regional steelmaker from the 1970s into a continental one in 1990s through a series of events. Laplace Conseil (2003), consulting firm for the London Metal Exchange, acknowledged that prior to 2000, Ispat, Tenaris, Arcelor and Riva were the only steel companies significantly present in more than one country. New challenges—deregulation of the steel industry—meant bankruptcies, while new opportunities—mergers and acquisitions—exemplified consolidation, thus creating new partners (Considine, 2005; refer to Appendix P: Flat Steel Mergers & Acquisitions, 2000). Prominent steel bankruptcies include USA’s Acme Steel and Thailand’s’ Nakornthai Strip Mill in 1998; and USA’s Wheeling-Pittsburgh and LTV Steel in 2000 (refer to Appendix R: Flat Steel Corporate Bankruptcies, 2000).

Moitti and Sachwald (2006) noted that globalization redrawn the map of the industrial world; and while foreign direct investment has been a powerful engine of globalization in the 1990s but by 2000 it shifted gears to the expansion of productive activities in low-wage countries. Aside from cheap labor, moreover, expansion shifted to some countries because of proximity to raw material sources, reduced tariff and taxes, among others. Glasmeier and Leichenko (1999) simply defined globalization as liberalized markets, free-flowing capital and lower-cost goods. Globalization is growth of international trade (Deardorff and Stern, 2001), plus the expansion of foreign direct investment, multinational corporations; integration of world capital markets and resulting financial capital flows, extraterritorial reach of government policies, attention of global issues, and the constraints on government policies imposed by international institutions.


Notes:

APEC (2005), “APEC Trade Facilitation,” APEC#205-SE-05.3. Singapore: APEC Secretariat, 09 November 2005, p. 2. back to text

World Trade Organization (WTO, 2005). Understanding the WTO, New York: WTO, October, 2005. pp. 1-10.
Friedman (2005)Friedman, Thomas L. (2005), The World Is Flat: A Brief History of the Twenty-First Century, USA: Farrar, Straus and Giroux, April 2005. pp 1-488 back to text

Anwar, Salman (2004), “Special Report: Overview of Global Steel Industry,” KWR International, Inc., 2004. pp. 1-8 back to text

Laplace Conseil (2003).Laplace Conseil (2003), The Steel Industry Globalization Trends. Proceedings of (London Metal Exchange) LME Conference, London: Laplace Conseil, 23 May 2003. Powerpoint Presentation. Slide 14. back to text

Considine, Timothy J. (2005), “The Transformation of the North American Steel Industry: Drivers, Prospects, and Vulnerabilities,” Pennsylvania: The Pennsylvania State University, April 21, 2005. p. 14, 24. back to text

Moitti, Luis and Frédérique Sachwald (2006), “The ‘Old Economy’ in the New Globalization Phase.” Paris, France: Institut Français des Relations Internationales, 2006, p. 16.back to text

Glasmeier, Amy K. and Robin M. Leichenko (1999), What Does the Future Hold? What Globalization Might Mean for the Rural South, Southern Rural Sociology, Vol. 15, 1999, pp. 59-83. back to text

Deardorff, Alan V. and Robert M. Stern (2001), “What You Should Know about Globalization and the World Trade Organization,” USA: The University of Michigan, 29 Dec 2001. p. 4-5 back to text

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