Between 1956 and 1961, the U.S. steel industry's unit cost for scrap declined relative to that of Japan. This was due pr imar ily to ...
Between 1956 and 1961, the U.S. steel industry's unit cost for scrap declined relative to that of Japan. This was due pr imar ily to increased unit purchases by Japan. Over the next 11 years, Japan's unit costs for scrap generally declined relative to those of the U.S. as Japan's unit purchase of scrap declined. U.S. unit purchases of scrap remained relatively constant over both per iods and there was no clear trend in relative prices of scrap. In 1973, the relative unit scrap cost for the U. S. declined sharply due to a relatively sharp rise in the Japanese price. In 1974, however, further decreases in Japan's unit purchases of scrap and an increase in the U.S.
relative price carried the U.S. relative unit cost above the 1972 level. A further decline in Japanese unit purchases carried the relative U.S. unit cost even higher in 1975. In 1976, the U.S. relative unit cost declined somewhat in spite 'of a relatively large increase in the U.S. scrap price because U.S. unit scrap purchases increased relatively less than those of Japan. -121- Coking Coal. From 1956 through 1960, Japan's unit cost for coking coal decreased relative to that of the U.S. due primarily to improved trading agreements which brought'decreas.es in Japan's price of coking coal. After 1960, the U.S. unit cost of coking coal decreased somewhat relative to Japan's (as the U.S. industry cut its unit purchases) but there was no clear trend, at least through 1971. In 1972, the relative unit cost rose for the U.S. above the 1960 levêl;' and in 1973, it rose further. Japan cut its unit purchases more sharply than the U.S. and, at the same time, the U.S. price rose more rapidly than that facing Japan. In 1974, relative unit costs for coking coal improved for the U.S.: but in 1975, an increase in the U.S. relative price caused the relative U.S. unit costs to exceed the 1973 level.
There was little change in 1976. It might be noted here that during the 1970's the U.S. steel industry's average acquisition cost for coking coal has been con sider ably lower than the cost ind ica ted in our ser i es. Major U.S. steel companies are heavily integrated into coal production and acquire much of the coal which they purchase under long-term contracts. The OPEC oil cartel engineered a rapid rise in energy prices during the 1970's and this has been reflected in the spot market price of coal (used in this study). The average cost of producing coal in the steel industry's own mines has increased at a much slower rate and long-term contracts have remained in force at the pr ice levels of earlier years. Industry sources indicate that in 1975 the average -122- ( \ production cost for captive coal was probably 45 percent less than the ii.arket price 10/ and existing long-term contract prices were about 10 percent lower.
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