The Degree of Vertical Integration
Another important aspect of the industry is the degree of
vertical integration. The best illustration of vertical integration by steel companies is the backward integration into
iron ore. Most of the major steelmakers in the United States
own or control domestic iron ore mines and have substantial
.~ .
international iron mine investments, principally in Canada, that
provide them with most of their ore requirements.
The principal
iron ore and taconite mines for the eight largest steel companies were determined in an attempt to discover to what extent
the steel companies are self-sufficient in iron ore. The production of mining companies which are multiply owned by several
steel companies was allocated to the owner companies according
to their ownership of shares. Only active mining operations
engaged in production in 1974 were included in our inquiry. lI
Table 2A.l shows the ownership pattern by summarizing the
proportionate interests of the var ious steel companies in
iron ore and taconite.
A crude measure of the degree of vertical integration was
estimated as follows. First, it was assumed that 1.35 tons of
iron ore was required to make a ton of steel. Multiplying this
ii United States Steel Corporation's Orinoco Mining Co. and
Bethlehem Steel's Iron Mines Co. of Venezuela, which were expropriated by Venezuela, were included for 1974.
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figure by each company's 1974 raw steel production yielded
estimates of its raw iron ore requirements. Each company's
estimated proòuction of iron ore was òivided by its estimated.
iron ore requirement to calculate an iron ore self-sufficiency
ratio. These are given in table 2A.2 for the eight largest ~~ - 'if,
u. s. Steel compan ies. The table shows tha t the top eigh t
steel companies min~ part of their iron ore requirements but
only U. S. Steel Corporation mines more titan 'it consumes. As a
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matter of fact, 32 percent of its iron ore was sold in 1974. lf
The United StateS Steel Corporation is not involveó in any
iron ore venture with any other domestic company. Only in
cases such as Brazil, where the government insists on majority
domestic ownership in ventures, does United States Steel
Corporation have a joint interest in an iron ore operation.
other steel firms purchase ore from non-integrated mines and
from foreign sources.
Most of the large coal producers are subsidiar ies or
. affiliates of large oil, metal, utility, and steel corporations. The major coal companies that are subsidiaries of steel
1:1- .,
companies are shown in table 2A. 3.
The large steel firms tend to be integrated vertically into
iron ore or coal or both. The partially or non-integrateõ firms
in the industry are in a considerably weaker position with
'respect to raw material supplies.
