27.
Which one of the following, if true, would best serve as supporting evidence for the author’s explanation of the economic condition of integrated steel producers?
Although the United States steel industry faces
widely publicized economic problems that have
eroded its steel production capacity, not all branches
of the industry have been equally affected. The steel
(5) industry is not monolithic: it includes integrated
producers, minimills, and specialty-steel mills. The
integrated producers start with iron ore and coal
and produce a wide assortment of shaped steels.
The minimills reprocess scrap steel into a limited
(10) range of low-quality products, such as reinforcing
rods for concrete. The specialty-steel mills are
similar to minimills in that they tend to be smaller
than the integrated producers and are based on
scrap, but they manufacture much more expensive
(15) products than minimills do and commonly have an
active in-house research-and-development effort.
Both minimills and specialty-steel mills have
succeeded in avoiding the worst of the economic
difficulties that are afflicting integrated steel
(20) producers, and some of the mills are quite
profitable. Both take advantage of new technology
for refining and casting steel, such as continuous
casting, as soon as it becomes available. The
minimills concentrate on producing a narrow range
(25) of products for sale in their immediate geographic
area, whereas specialty-steel mills preserve
flexibility in their operations in order to fulfill a
customer’s particular specifications.
Among the factors that constrain the
(30) competitiveness of integrated producers are
excessive labor, energy, and capital costs, as well as
manufacturing inflexibility. Their equipment is old
and less automated, and does not incorporate many
of the latest refinements in steelmaking technology.
(35) (For example, only about half of the United States
integrated producers have continuous casters,
which combine pouring and rolling into one
operation and thus save the cost of separate rolling
equipment.) One might conclude that the older,
(40) labor-intensive machinery still operating in United
States integrated plants is at fault for the poor
performance of the United States industry, but this
cannot explain why Japanese integrated producers,
who produce a higher-quality product using less
(45) energy and labor, are also experiencing economic
trouble. The fact is that the common technological
denominator of integrated producers is an inherently
inefficient process that is still rooted in the
nineteenth century.
(50) Integrated producers have been unable to
compete successfully with minimills because the
minimills, like specialty-steel mills, have dispensed
almost entirely with the archaic energy- and
capital-intensive front end of integrated steelmaking:
(55) the iron-smelting process, including the mining and
preparation of the raw materials and the
blast-furnace operation. In addition, minimills have
found a profitable way to market steel products:
as indicated above, they sell their finished products
(60) locally, thereby reducing transportation costs, and
concentrate on a limited range of shapes and sizes
within a narrow group of products that can be
manufactured economically. For these reasons,
minimills have been able to avoid the economic
(65) decline affecting integrated steel producers.