Superlatives reigned as US President Donald Trump declared that Essar Group’s Mesabi Metallics would invest $15 billion to set up a steel-making unit in Iowa. With a capacity of 7.5 million tonnes, potentially going up to 10 million, it would be “the largest steel plant in American history,” he said, churning out “some of the highest quality, most affordable steel anywhere in the world.”
This is an attempt to revive an old project involving an Essar acquisition in iron-ore-rich Minnesota that went bust in 2016, shortly before the Group’s Indian steel operations did. Essar Steel India Ltd, which went into insolvency in 2017, was among a ‘dirty dozen’ insolvent firms identified by India’s central bank for priority resolution; it was acquired two years later by ArcelorMittal in alliance with Nippon Steel.
In the years since, the Ruia family-owned Group’s desire to re-enter the business of steelmaking has come to converge with Trump’s efforts to make America produce this metal again. It seems like a win-win. But is it?
The answer depends to quite an extent on the trajectory of US trade and climate policies. Under Trump, these have defied what’s good for the world. Today’s White House has placed steel high on America’s list of must-makes; and, like greatness, this is aimed not just at economic gains, but also national security.
The metal goes into military hardware. While its role in warfare goes back millennia, World War II still resonates. It was over steel that the 1940 Battle of Narvik was fought, with the UK trying to choke Germany’s access to iron ore.
It’s another story that the Allied victory of 1945 was shaped less by raw metallic output than how swiftly and cost-efficiently it was used by the US to roll weaponry off assembly lines in bulk. Credit must go to industrial innovation at the service of war-theatre strategy.
Still, in 2018, a trail of US plant closures and a claimed need to keep steel handy led first-term Trump to shield steelmaking with a 25% tariff (a package renewed last year). Some plants reopened on that promise of viability, and Essar seems to be betting on it.
Across the Atlantic, though, what World War II yielded was a coal-and-steel pact designed to prevent war. At its core was a device that wouldn’t let either France or West Germany go for an arms build-up on its own, but its trade benefits came to serve as the basis of what evolved into the EU as a common market.
This quest for integration has a global version: free trade. The US may have turned its back on it, opting to let end-user costs rise, but a globalist leader of the future might trust cheap imports enough to reverse course and make space for ‘pax globalana.’ After all, what’s good for the world is good for America.
That axiom applies to climate policy too. Should America’s current denial of a crisis endure, it could plausibly grant its steelmakers a cost edge. As carbon levies and markets push other producers to decarbonize factories—done by adopting electric-arc technology and clean hydrogen for ore reduction to iron, with tech-frontier options like electrolysis under test—plants in the US may escape the burden of carbon pricing. Yet, nobody can count on this, which partly explains the US industry’s push for a clean-up.
Again, while the EU’s policy path may be imperfect, a public handle on carbon exhaust across the globe is clearly in the world’s interest. Perhaps the US can afford to stay aloof from worthy global pursuits. But that would be a bet on a warped vision of its greatness.