Labour costs are relatively small in the steel industry, since the processes are generally capital- rather than labour-intensive. An advantage of labour cost is therefore generally not decisive in determining the competitive position of a steel producer. Access to captive raw materials, transport costs for raw materials and products, technical efficiency and process losses are usually more significant than the cost of labour in determining the difference between plants. The labour cost element becomes increasingly important with the degree of processing of the steel product - production of tinplate is more labour intensive than production of slab. This is one reason for the rapid movement of some producers (e.g. in Japan) into downstream products, such as organic coated coil, where their labour cost advantage can offset their fundamental disadvantage of importing raw materials.
Large steel companies are usually unionised and have wage rates that are high by national standards. Strong unions can often restrict the flexibility of a plant in its response to market conditions. Smaller plants sometimes have the advantage of non-union employment.
Large steel plants are often major employers in their local area, with two consequences. The first is a strong political position, which enables steel companies to be heard in government in such matters as disputes over unfairly priced imports or legislation over carbon taxes. The second is a potential obligation to maintain employment for political reasons, or to pay for social overheads such as company housing and medical facilities that might normally be the responsibility of governments.Environmental issues
Steel producers face increased costs and restrictions on their operations to meet environmental regulations. This affects at least the following aspects of their operations.
The steel industry is a large consumer of water. This includes water for:
It would seem that water supply will not be a large issue for an EAF steel plant and associated rolling mill, but would become significant for an integrated steel plant or if iron ore mining requires a wet concentration process to upgrade the crude ore (as opposed to a dry process in which the iron can be magnetically separated from the ore without large quantities of water for flotation or other processes).
Plants in Qatar, Saudi Arabia, UAE and Oman are in desert locations. These have DRI and EAF processes and perhaps use desalinated seawater produced in association with their gas-fired electricity generation. Water supply does not seem to be an issue restricting their expansion. In other countries the availability or price of water supply will be a limiting factor on the development of the steel industry. In all cases investment will be needed in water recycling processes to minimise the requirement for fresh water supplies.