Technological change and energy consumption in US iron and steel manufacturing

This paper examines the extent to which the rising relative energy prices of the past decade have influenced managerial decisions in U.S. iron and steel manufacturing. Efforts at energy conservation, as well as opportunities for short-run substitutions among energy sources, were constrained mainly by existing process technology. The actual pattern of substitution can be explained to a large extent by changes in techniques. Decisions concerning such investments were guided by many factors, among which considerations of energy savings played only a minor role. This observation can be explained by the fact that, although the industry in the aggregate is a prodigious consumer of energy, energy costs at any one production stage are but a small fraction of total variable costs. Integrated greenfield plants embodying state-of-the-art technology would achieve much higher levels of energy efficiency than are currently realized, but such new plants are unlikely to be built in the United States, under the current conditions of global excess capacity.