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Governmental delegations from 18 countries accounting for 75 per cent of the world's steel production, met with union and employers' organization representatives in Geneva to discuss recent and projected transformations in the industry and their impact on the seven million workers it currently employs. When the meeting ended, participants came away with a mixed message: while steel continues to drive growth, expect labour to pay a price for globalization and new technology. Intense and growing competition means that governments, employers' and workers' organizations must work together to ensure the industry's sustained growth and to promote the development of stable, productive and skilled employment.
Gyrating consumption, plummeting jobs
Per capita consumption of steel - in the form mainly of construction and of durable goods - is closely linked to the level and rate of a country's economic development. It ranges from an average of 17 kilograms per year in Africa to 625 kilograms in Japan. Consumption in industrialized countries is expected to remain static or to decrease slightly in the coming decade, according to a new ILO report(*). "Strong growth is, however, expected in Asia (40% over the period), notably in China (150%) and, to a lesser extent, in Latin America (18%)."
Steel is currently produced in about 100 countries, says the report pointing out that "in the 15 years between 1981 and 1996 the share of world steel production held by industrialized market-economy countries has fallen slightly from 54.5% to 51.2%. Production in the CIS and Eastern Europe, however, has halved from 29% of the total to 14.3%, whereas production in China and other Asian countries (excluding Japan) has almost trebled from 9.6% to 25.5%".
With nearly 3.2 million steelworkers, China has, by far, the largest workforce. "China, the CIS and India together account for about 70% of the industry's total labour force, but only about 30% of steel production". Other countries where steel employs a large workforce include the United States, Japan, Romania, Brazil, Poland and Germany.
The largest job losses have occurred in Europe. "In the European Union, the total number of steel jobs dropped by over 65% (from 991,000 to 326,000) in 1975-95. In France and the United Kingdom steel employment fell by 75% and 80%, while production fell by 16% and 14% respectively. In the United States and Japan 51% and 48% of steel jobs were lost compared with falls in production of, respectively, 10% and 1%".
Workforce reductions, albeit less severe ones, have also affected the countries of the former USSR. In the Russian Federation, approximately 10% of steel industry jobs have been eliminated over the last five years. But, warns the ILO report, "this may be just the start". According to the Federation's Ministry of Industry, as many as 310,000 jobs will have to be shed over the next five years to keep Russian steel competitive. This represents more than 40% of the 705,000 steel jobs existing in the country in 1996.
"The huge social costs of increased competitiveness that have been paid in Western Europe still have to be quantified and funded" in much of Eastern Europe and the former USSR, notes the report.
Technology, privatization drive change
Two principal factors lie behind this trend. The first is the radical transformation of the industry as a result of technological innovations.
Steelmaking today is a high-technology industry "in the vanguard of computer-integrated manufacturing". Traditional large and labour-intensive open-hearth plants are being "driven out by more efficient and environmentally sound basic oxygen converter and electric arc furnace operations". More efficient production of new, lighter steels means that less raw steel is required in each finished product and hence less workers to produce it.
New production processes are "attracting new capital to highly efficient, strategically located steel plants", which tend to be much smaller than the huge integrated steel mills that were the norm in the past. Because they are closer to markets and employ fewer workers, "mini-mills", as they are known, have proved highly competitive. "The TRICO mini-mill in the United States, a joint venture of US, Japanese and British steel companies, has a workforce of less than 600 producing 2 million tonnes of steel a year, whereas in the United Kingdom 4,000 workers directly involved in steelmaking produce 3 to 4 million tonnes" over the same period.
The second determinant factor has been the withdrawal of the State from its long- standing ownership and control of the iron and steel industry and its consequent privatization. In Western countries, the process is virtually complete and it is accelerating elsewhere: "less than 20% of steel production remains in state hands; in 1994, it was 40% in Europe alone". The overstaffing typical of state-owned steelworks has given way to rationalization and heavy employment losses as the industry went private.
Another consequence of privatization has been the internationalization of the industry and the cross-border mergers and acquisitions which have accompanied it. "Japanese steel companies pioneered international steel acquisitions, acquiring 50% of the shares of National Steel, then the fifth largest United States steel company. By 1990, NKK had increased its stake to 70%, and all other major Japanese steel producers now have joint ventures with United States steel companies."
Substantial foreign investment by steelmakers in industrialized countries has generally focused on modernization while in developing countries, particularly in Asia and Latin America, investments have largely been directed towards increasing capacity close to fast-growing markets.
A "cultural revolution"?
In terms of working practices, these transformations have resulted in something akin to a cultural revolution. The rigid occupational structures of the past are being cast aside in favour of greater functional flexibility. Computerization has made certain skills redundant. Promotions based on seniority have given way to job structures based strictly on competence. And as the report also points out, "rapid technological change means that experience is no longer the best criterion for selecting workplace supervisors; training, qualifications and adaptability are often more relevant".
"The human dimension is the key to the future", suggests the ILO report. "Technical advances are short-lived and new procedures are developed at an increasing rate....Successful steelmaking in the twenty-first century will depend more than ever on an enduring but responsive and flexible partnership between the enterprise and its workforce."
Another issue of vital concern is environmental management. The steel industry is second only to the cement industry in the weight and volume of material processed. Worldwide, the 750milliontonnes of steel currently produced each year generate some 30 million tonnes of solid waste. "But the environmental impact of iron- and steelmaking has been dramatically reduced over the last 20 years", says the report"; half as much solid waste is produced per tonne of steel than in the 1970s" as a result of both new technologies and the introduction of stricter environmental legislation. Steel itself is routinely recycled. Today, "over 300 million tonnes of used scrap steel (40% of production) is used in making new steel products".
In the future, says the report, "the greatest potential impact for...steel producers that is associated with environmental management is likely to come from...responses to the greenhouse effect. Future international agreements to reduce the emission of greenhouse gases will inevitably have an impact upon the production processes".
"The winners in the next millennium", concludes the ILO report, "will be steelmakers who focus on product quality and environmental management , who meet customers' schedules, and who train and motivate their workforce to see quality production and environmental responsibility as the means to job security and advancement in a progressive enterprise".
*The Iron and Steel Workforce of the Twenty-first Century. Report for discussion at the Tripartite Meeting on the Iron and Steel Workforce of the Twenty-first Century: What it will be like and how it will work. ILO, Geneva, 1997. ISBN 92-2-110507-5.