They both sell the same thingIf prices are to high companies won't by the steelIf prices are to low then the steel company won't earn enoughWhy are some steel companies more successful than others
Steel is a global commodity. There is some variety in product (flat rolled, tubing, etc), but basically the same product worldwide. Cost to the customer includes shipping of a very heavy product. Inputs are also heavy and costly to ship. Inputs: - Coal - Iron Ore. Some firms have the ability to recycle old steel, a competitive advantage. - Energy (very energy intensive industry) - Labor - Machinery. A new blast furnace is more efficient than 50 years old. So the most profitable steel firms have some of these characteristics: - Proximity to raw materials - Proximity to customers - Access to cheaper means of transportation; rail and sea - Newer machinery - Cheaper labor force - Reasonable cost for electricity and fuel for furnaces
