Matt Mackowiak: Steel industry consolidation threatens American workers and our security

The average American may spend little time thinking about the domestic steel industry, but despite its low profile it remains vital to the American economy (especially in manufacturing) and to our national security.

According to BDO, “annual (steel) production was approximately 1.25 million tons in 1880, 10 million tons in 1900, and 24 million tons in 1910, which was by far the greatest of any country and about 40% of the global steel production that year. During this time, the American economy grew to become the largest in the world, largely due to the jobs and economic output coming from the growing steel industry.” Global steel demand decreased sharply after World War II. Today, the industry employs more than 80,000 American workers.

It is impossible to think of domestic steel production and not immediately think of U.S. Steel, a historic American company, and the second-largest steel producer in the United States. It remains a major supplier for the American automotive and defense industries, playing a key role in America’s domestic supply chain and national security.

Attempts to purchase U.S. Steel by rival firms in the steel industry would create unprecedented consolidation in the American steel industry, jeopardize workers and harm consumers.

If regulators want a strong, healthy American economy, they must maintain competition in the steel industry and prevent further consolidation that would result in higher prices for American consumers.

How important is US Steel?

U.S. Steel is a major supplier to our automotive industry. One of its competitors and potential buyers, Cleveland Cliffs, is another major supplier for the automotive industry.

If those two companies merged, together they would own 100% of American iron ore deposits and over 50% of steel sold to the American auto industry.

The American Prospect reports, “If it acquires U.S. Steel, Cleveland-Cliffs would become the largest steel conglomerate in the United States and a top-ten steel producer in the world, competing against Chinese steel producers that have dominated global markets for decades.”

Cleveland-Cliffs would be the sole employer for the steel industry in the region based in Gary, Ind.

The Times of Northwest Indiana reported, “Cleveland-Cliffs said it would also save from asset and capex optimization that could potentially result in more Northwest Indiana steel operations being taken offline and less spending on capital projects in the Region, potentially resulting in fewer jobs from skilled union tradesmen.”

Steel is also a critical material for the U.S. military and national security.

According to the American Iron and Steel Institute:

• Steel plate is used in the bodies and propulsion systems of the naval fleet.

• The control cables on virtually all military aircraft, including fighter jets and military transport planes, are produced from steel wire rope.

• Land-based vehicles such as the Bradley Fighting Vehicle, Abrams Tank, and MRAP vehicles use significant amounts of steel.”

The consolidation of major American industries into fewer and fewer large firms has had negative consequences for market competition, consumers and workers.

According to CNN, “More than 75% of U.S. industries have experienced an increase in concentration levels over the last two decades.”

While we must let the free market work, there are times when consolidation in industries can also undermine union power and collective bargaining.

According to some labor economists, consolidation in unionized industries gives more leverage to corporations in collective bargaining negotiations. A combined U.S. Steel and Cleveland Cliffs would be the only unionized steel producer in the United States. This means the United Steelworkers could not play one company off the other in future negotiations. This is the strategy being used by the United Auto Workers during the ongoing negotiations with the Big 3 American automakers.

New York Times columnist David Leonhardt wrote that “since the modern merger era began in the 1980s, corporate profits have surged, while family incomes have stagnated and income inequality has increased.”

Industry consolidation has led to decreased wages for workers, in some cases by as much as 17%.

At a time of high inflation, American consumers and industries cannot afford to have an industry of such a critical material consolidated into non-competitiveness.

The United States is still experiencing record-high inflation. In July 2023, annual inflation was 3.2%, which hadn’t been seen since 2011.

The Biden administration has said that reigning in corporate consolidation and anti-competitive practices in corporate America is a priority. President Trump brought this issue back to the forefront, and so far President Biden has yet to deliver on his promises.

In order to protect competition in a key American industry, workers and consumers, federal regulators must ensure that there is no further consolidation in the American steel industry. The Biden administration has made blocking anti-competitive mergers a priority, and Lina Khan’s Federal Trade Commission has been aggressive in regulating other industries, especially big tech. However, she is ignoring a historical sector in the steel industry, which has already suffered from consolidations over the past 20 years. If Khan ignores this issue and hesitates to use her regulatory authority to protect American consumers and workers from further consolidation, then what is the point of the FTC?

Matt Mackowiak is the president of Potomac Strategy Group and a former press secretary to two U.S. senators. .