US Steel industry decline

Tom's setup for the Sputnik-as-wake-up-call narrative. The 75%-to-25% collapse over twenty-five years is a framing statistic Tom uses across multiple lectures to motivate discussions of the US steel industry decline and Japanese competition.

There was a big change after 1957 when the Russians launched Sputnik. That was a wake-up call for the United States. We thought we ruled the world in science and technology after World War Two. We did produce seventy-five percent of the world's steel in 1945. Anybody know why? Yeah — we bombed them out. That is the best way to beat your competition: send a B-52 over, bomb them out, they're gone, they won't be selling that product over here. And then twenty-five years later we made twenty-five percent of the world's steel.

US mills operating at 50–60% of capacity while Korea, Japan, China, Romania build new plants for political-economic reasons; Kennedy's 1962 price rollback; US Steel built world's largest Open Hearth (450 tons, Pittsburgh) around 1970 when process was already dead.

And so all of a sudden the US steel industry was operating at 50, 60% of capacity, when they needed to — just like the airlines, the airlines can't make money unless they're operating at 80, 85% of seats filled. Well, the US steel industry couldn't make money at 60% of capacity, when whole countries like Korea or Japan or China or Romania were building steel plants. The American steel industry couldn't afford to replace their 1911 blast furnaces. They didn't have the profitability. President Kennedy helped ensure that in 1962 when he made them roll back prices. The whole steel industry is a very complex story, but from the 1980s and 1990s Wall Street would say this is a dying industry — I'm interested in silicon. Do you know how many bridges have been built out of silicon? Some of us knew they would still be building steel cars, steel bridges, steel ships. But no one would believe that on Wall Street.