The next contender in the category of “too big to fail” appears to be Big Steel. Through the first three quarters of 2008, the steel industry was going gangbusters. By late December, however, weekly production had fallen by more than 50% from August levels. Prices have fallen like lead. Tens of thousands of workers, mostly unionized, have been temporarily laid off, with future prospects exceedingly grim. Now industry execs are praying for an Obama miracle of government investment and subsidies.
The steel industry, having entered the recession in the best of health, is emerging as a leading indicator of what lies ahead. As steel production goes – and it is now in collapse – so will go the national economy.
That maxim once applied to Detroit’s Big Three car companies, when they dominated American manufacturing. Now they are losing ground in good times and bad, and steel has replaced autos as the industry to watch for an early sign that a severe recession is beginning to lift.
The industry itself is turning to government for orders that, until the September collapse, had come from manufacturers and builders. Its executives are waiting anxiously for details of President-elect Barack Obama’s stimulus plan, and adding their voices to pleas for a huge public investment program – up to $1 trillion over two years — intended to lift demand for steel to build highways, bridges, electric power grids, schools, hospitals, water treatment plants and rapid transit.