Bonus: Steel’s Economic Tale from the Wall Street Crash to Today and the Future

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Episode Description

Justin Hayden Miller (Global Trade lawyer) discusses steel - its history, its place in the 1929 Wall Street Crash, through to its future. 

The episode is published to coincide with the NASCC: The Steel Conference event in Louisville, Kentucky, on April 2, 2025, 

In particular, the episode addresses:

- Comparisons between today’s economic events and those of the 1920s and 1930s

- The importance of steel as a commodity.  Steel commodity prices per ton and steel production in the1920s

- Reasons for the drop and crash in steel prices in 1929

- Steel as architectural frames: the art deco New York Chrysler Building and the Empire State Building

- Properties of steel

- Steel used for spaceship components; Space X and Elon Musk’s Starship; The role of steel for any manned mission to Mars

- Stainless steel’s invention by Harry Brearley, and the story of stainless steel in Sheffield ("rustless steel”)

- Steel as a barometer of the world economy

- the current price of steel and oversupply

- US steel demand and tariffs

- European Union Steel Safeguard Measures: the EU Tariff Rate Quotes (TRQ) and Anti-Dumping tariffs

- An explanation of Absolute Quota Systems and Tariff Rate Quotes (TRQ), using analogies

- Trade Diversion and protective measures

- A comparison between the properties of steel and those of world and economic leaders

ARTISTIC REFERENCES:

$100 Bill (Song) Rap, Hip-Hop

Written by Jay-Z and Producer, Evan Mast.  

Written for the 2013 film adaptation The Great Gatsby.  

Recorded May 6, 2013. 

Spotify: https://open.spotify.com/track/4XP935ZDMy36SyYGB8wadP?si=924c9d14548f4875

The Great Gasby (movie) 2013

Directed by Baz Luhrmann; Starring Leonardo DiCaprio, Tobey Maguire and Carey Mulligan.

Release Date: May 1, 2013 (New York City)

Star Wars (Movie) 1977

Written and Directed by George Lucas. 

Release Date: May 1977

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Chapters

• 0:00 The Significance of Steel
• 4:37 1929 Steel and Economic Crashes
• 9:03 The Birth of Stainless Steel
• 14:28 Steel as Economic Barometer
• 18:30 Steel's Future in Space Exploration
• 22:02 Current Steel Market Trends
• 25:15 Import Quotas and Trade Barriers

Transcript

Justin Hayden Miller: 0:00

In this episode we'll be discussing steel and you'll also see why this metal alloy is so important, not only to industry and the economy, but potentially as well to our future survival as a species. Welcome to Privileged Discussions offering fresh perspectives on current affairs shaping global trade. I'm Justin Hayden-Miller, global trade lawyer and partner at a leading European law firm decoding the latest global trends. I'm often fascinated by the interwar period, that period between the two world wars, world War I and World War II, the 1920s and the 1930s. It was a rollercoaster period of extreme ups and downs the ups of the Roaring Twenties, followed by the extreme down of the Great Depression, and followed by the rise of fascism, but also communism and totalitarian regimes. And so I'm walking down the street last week thinking of possible subjects for this episode, when Jay-Z's $100 bill track started playing on my playlist. The refrain $100 bills is constantly repeated throughout the song. It's a song about the roaring 20s and the novel the Great Gatsby stock market just crashed and later, history don't repeat itself. It rhymes 1929, steel. And I sort of stopped in my tracks in the street and thought that's my next episode, because there is so much in those lyrics and the lyrics of that track which mirror issues concerning the present Volatile stock markets because of trade wars and whether the times of today truly mirror the 1930s. The phrase history don't repeat itself but it rhymes is, of course, often attributed to another great American writer, mark Twain. The idea that events of history do not perfectly repeat themselves, but there are similarities between different times all too often sadly identified too late Wars, for example, both physical and trade wars, and stock market crashes. But it's 1929. Steel in the lyric that I particularly want to talk about.

Justin Hayden Miller: 2:26

Steel was a supremely important commodity then and it still is. In early 1929, the price of structural steel, such as steel beams, was up to around $50 a ton. As Scott Fitzgerald himself wrote in his great Gatsby novel my life, my life has got to be like this. It's got to keep going up, just like 1929 steel commodity prices. By the end of 1929 and after the October 1929 crash, steel had only fallen to a price around $42 a ton. That's only a 16% drop. It's a lot, but not in the context of the 1929 Wall Street crash. The price didn't plummet immediately because steel has an inertia as a bulk commodity, which means that whilst it can be a barometer of the economy when viewed together with other indicators, its decline in price can lag behind the financial chaos of a crash, a bit like the tail of a whip its true effect is felt at full force at the very end.

Justin Hayden Miller: 3:37

But the steel industry's rampant growth in the 1920s is considered as a contributing factor to the economic bubble of the time, the Roaring Twenties. Overproduction was driven by speculative investments. In 1929, us steel production represented some 50 million tonnes, but was only 13 million tonnes in 1932. That is a staggering 74% drop. Just to put it into context, it is considered that the price of US steel stock was some $260 a share in its peak in 1929, but it plummeted to just $21 a share in 1932. That is a staggering 92% drop due to a 75% drop in steel production.

Justin Hayden Miller: 4:38

How did this happen? Well, many people in the 1920s purchased shares and securities on the margin, which means that they bought their stocks and shares essentially by only making a down payment for them. In the 1920s this could be around 25%, but on occasions could be as low as 10%. Buying on the margin is essentially a means of borrowing the difference. Borrowing the difference from the broker, often in the expectation and the hope that the stock price will increase. Buying on the margin allows investors to bet on the stock market for amounts several times greater than their means. Fine when the market is going up. But if it drops and the broker asks the investor to pay up the difference, which is called a margin call, the investor can be in deep trouble if he doesn't have the cash to pay up the difference, which is called a margin call. The investor can be in deep trouble if he doesn't have the cash to pay it. And this is what happened at the end of the 1920s.

Justin Hayden Miller: 5:33

The most iconic skyscraper in the 1920s is undoubtedly the New York Chrysler building designed by William Van Allen. Begun in 1928, it used steel as its frame, which was completed in 1929. 1929 steel Its style is quintessentially Art Deco, perfect Gatsby and latter roaring. 20s, the building used just 21,000 tons of steel, and the Empire State Building, completed a few years later in 1931, at the height of the Great Depression, used 60,000 tons of structural steel simply to create its core skeleton. And the whole thing was completed in just 410 days.

Justin Hayden Miller: 6:29

And what is this important substance for the economy called steel? What is it exactly? It's principally iron, which, as it happens, is just about the most common element on earth, forming much of earth's outer and inner core. So steel, for the most part, is made up of iron, but it is alloyed, mixed with other metallic elements, such as chromium or nickel, to increase its strength, bendiness and corrosive resistance. Steel, then, is a refined version of iron, made from tweaking iron's chemistry with other chemical metal elements. If you weren't born with a silver spoon in your mouth, the chances are you were born with a stainless steel one in it instead.

Justin Hayden Miller: 7:16

Harry Brearley, an Englishman from Sheffield, is accredited for inventing stainless steel in 1913. He was from a steelworkers family. Brearley taught himself metallurgy through books and trying this and that out. All started in 1912, the year of the sinking of the Titanic. Britain's gun makers were complaining about rifle barrels eroding too quickly, the firing of the guns, wearing them down. Brearley's job was to find a better and tougher alloy. He started experimenting with chromium. It's a shiny, hard metal.

Justin Hayden Miller: 7:54

Steel had been made by taking iron and adding carbon, but Brearley added a load of chromium to the mixture up to 14% of it and then melted it all in a furnace. Anyway, it was too hard and brittle and not suitable for guns at all. He simply threw away what was over in a scrap pile. Weeks later he noticed they weren't rusting or even corroding, even in Sheffield's humid, dirty air at the time. He even tested it in vinegar and lemon juice Nothing Still no corrosion. This was because the chromium in it formed a thin, invisible oxide layer on the surface, sealing it from decay.

Justin Hayden Miller: 8:36

The story seems to me to be the industrial manufacturing version of the story of Pasteur and penicillin. Pasteur threw some cheese into a Petri dish and by accident left it a couple of weeks, only to discover that it had killed all the bacteria. The birth of antibiotics. Brearley called his new substance rustless steel, and it began to be used for cutlery machines and a great deal many other uses. Calling it stainless stuck later when they were made into knives. But traders were wary of the new material. It was only when a stock was stolen that it was found in the local restaurants that they really realised they were onto something.

Justin Hayden Miller: 9:18

Steel is not just a very useful material but because of its importance it is often a very useful barometer of the health of the economy. Steel is often seen as being the blood pressure of the economy of sorts. Why? Because steel is a fundamental material used in industries such as infrastructure, construction, automotive and manufacturing in general. China alone made 1 billion tons of the stuff in 2023. It's everywhere in buildings, surgical tools, car frames and even your knives and forks. When the price of steel rises significantly, it often signals growth. When its price significantly decreases, then it can be a sign of weakened growth and the economy and even an alert of a possible recession.

Justin Hayden Miller: 10:15

For many years, my offices were in Neuilly in Paris. I could see the French skyscrapers in the La Défense business sector of Paris through my window. I can always remember the dot-com bubble in the early 2000s and especially immediately after the financial crisis in 2008,. Businesses carried on perfectly normally, except that the multitude of construction cranes that I could see from my office window would simply stop moving and hang there motionless, because my experience tells me that one of the first industries impacted by major recessions is the construction industry. Those cranes would stop when the building stopped. With cancelled construction contracts, the demand for steel would reduce long before day-to-day business necessarily saw the consequences. Yep, that office window in Neuilly was the best economic of indicators.

Justin Hayden Miller: 11:15

Steel prices also reflect the level of energy costs because it requires so much energy to produce in those hot furnaces. That's very important today with the price of energy, but it also reflects trade outlook, infrastructure spending and even geopolitical tensions and tariffs affecting supply chains. But a warning care needs to be taken. Going back to the 1920s and 1929, for example, president Hoover, an engineer himself, used the state of industrial activity, including steel production, as evidence of the strength and the health of the US economy, soon to be proved wrong by the end of the year and the resulting 1929 crash. So let us say that steel production and prices can be considered as a good barometer for the economy, provided it's viewed within the context of other indicators.

Justin Hayden Miller: 12:14

Steel is rather like one of those old barometers that your grandmother might still have on the wall. You know the ones I mean An analogue thing made from brass that looks like a clock that you have to bang hard with a couple of fingers to get it to work. It simply tells you the pressure. If the pressure's low, then it's probably cloudy, rainy or windy, and if the pressure is high, then it's probably a nicer day. Steel is a barometer in this sense. It's not fail-safe and it's wise to judge it by using other means and indicators as well. If I'm advising on importations of steel, then I want to know the circumstances and the reasons for its importation, but I also want to know quite a bit about the product itself, steel in this case. It's not just about knowing what the product is, it's about knowing something about its history, what it feels like to touch, how it sounds.

Justin Hayden Miller: 13:13

As a child, I would always stand at the front of the platform of a railway station or on a London Underground to hear the sound of the train when it entered and passed through the station, that pulsating sound on the rails when the train gets close. The sound of a train. Oh, no, no, no, no, no. Not for me it was Luke Skywalker in his T-65 X-Wing fighter with R2-D2 in the back, firing laser shots at Stormtrooper fighter spacecraft of the train actually going past. That was the Death Star exploding after Skywalker had made one final assault run, firing two proton torpedoes into the reactor core of the giant battle station. So what really is that pulsating sound that you can hear when a train is approaching? It is the sound of the oncoming train on steel train tracks, from the sides of the steel train wheel rushing on the steel tracks, particularly when there is a curve on the track on the arrival into the station, and the molecules in steel, being a metal are much closer and more compact than an air, so sound travels some 17 times faster through steel than in air and there's a lot less resistance for sound travelling through steel, so the sound travels for a much longer distance. That's the reason why you can hear the pulsating sound way ahead of the train arriving into the station.

Justin Hayden Miller: 15:11

But you know, the parallel between steel and Star Wars may be less than you think, because steel is likely to play an important role in any manned mission to Mars, whether it's for spacecraft construction, habitat building or resource utilisation on the planet itself. And don't forget that iron oxide, otherwise known as rust, is abundant in the soil on Mars and it could be potentially processed into iron and then steel using carbon dioxide in the atmosphere. Processed into iron and then steel using carbon dioxide in the atmosphere, used for durable habitats to withstand Mars's harsh climate and storms For the journey. Steel's strength and durability should make it a valuable material for certain spaceship components. Okay, lightweight materials like aluminium and composites are often preferred for fuel efficiency, but steel alloys can be used in high-stress areas like pressure vessels, landing gear or structural supports that need to withstand launch forces and re-entry stresses. Elon Musk's SpaceX's Starship, for example, relies heavily on stainless steel thanks to its durability, heat resistance and even cost factors. It could therefore be a fundamental component on any interplanetary colonization and therefore our future survival as a species might therefore be thanks to it.

Justin Hayden Miller: 16:42

So what about current steel production and the current price of steel, and what might this say about the current economy and trends? World steel production and prices have both seen a recent decline. In 2024, production dropped by around about one percent. Production declines in North America point to weakened demand in steel-consuming sectors at least. Production is even dropping in China. Oversupply of steel, far outstripping demand, has become a major issue where China's exports of steel are seen to be flooding the world market and depressing prices.

Justin Hayden Miller: 17:23

The outlook does not generally look good, therefore, when looking at steel prices in isolation. But an upside could be anticipated increased demand in steel in the US in 2025, particularly for the automotive industry. And if President Trump gets his own way and the US boosts its car manufacturing industries, then demand for steel, for the United States at least, could become even higher. The same call is being made in the US to rekindle its shipbuilding industry, which would certainly need a packet of steel if actioned. But steel tariffs imposed by the US are making this option much more costly and potentially less likely as a consequence. So steel prices indicate a present sense of uncertainty in the world economy as a consequence of weakening demand and oversupply, but with some hope, thanks to anticipated growing US demand. In short, current steel stocks indicate that no one has an inkling what's going to happen next. My take is that demand does seem to be depressed, but that oversupply is the tipping point for pushing prices down, rather than significant pessimism about the economy.

Justin Hayden Miller: 18:41

So, given the importance of importations of steel for the reasons that we've discussed together, rules concerning their importation are particularly important. When importing steel, or any product for that matter, you need to determine the precise type or classification of the products being imported, assigning it to a specific classification description number, but also the country of origin and any specific trade agreements need to be taken into account. The European Union has already put what is known as EU steel safeguard measures in place, which operate on a quota basis based on a tariff rate quota or TRQ, and there is the application of anti-dumping tariffs in certain cases as well, where specific tariffs are applied because it's considered that too much steel is flooding into the market and unfairly reducing the sale price of steel. So let me explain the EU quota system, which is somewhat fascinating. To be honest, there are essentially two types of quota system that can apply Absolute limits on the amounts of importations of a product that are allowed to be imported and secondly, a tariff rate quota system, whereby the rate of tariffs increases once a certain amount of particular product has been imported. Let me give you an analogy For the first example concerning absolute limits.

Justin Hayden Miller: 20:11

Imagine the television series Game of Thrones. The EU or any customs area, such as the US, is like a medieval fortress. It's got high walls, essentially customs frontiers, with guards around it representing the customs officers. Treasure in the form of steel goes in and out of the fortress, which helps the fortress build bridges and creates jobs and economic muscle, helps the fortress build bridges and creates jobs and economic muscle. These guards, or customs officials, guard the fortress against invaders which, in this analogy, are essentially foreign companies and countries flooding and importing the fortress with cheap steel. So the guards, customs officers, let a particular amount of steel come into the fortress from the exterior. Let a particular amount of steel come into the fortress from the exterior, potentially charging something for the fact the tariffs and when a particular level is hit or attained, they pull up the drawbridge and prevent any more from coming in. So that's an absolute quota. Now the tariff rate quota TRQ system is different. With the tariff rate quota, the rate of tariffs increases once a certain amount of particular product has been imported. This is the system that the EU uses for steel imports. It's difficult to think of an analogy, but I think I've got one. I think I've got one.

Justin Hayden Miller: 21:42

Imagine an office which has a kitchen. Every day, the office clerk prepares a large thermos flask of coffee. The coffee in the large pot is free for everyone in the office to use or is invoiced for a low amount. When the coffee pot is empty, though, everyone wanting a coffee has to go to the coffee machine, and it's a lot more expensive, and each person has to pay for their coffee individually. Michael, paul and Sarah are in the office one day. Michael and Paul are morning coffee people Like me. They need a few good coffees in the morning to get going, so they drink much of the coffee in the pot and pay nothing for it, or very little. Sarah, however, prefers her coffee after a proper meal, so she has her measure just after lunch, but by then the coffee pot is empty or almost finished. She therefore has to buy her coffee from the machine, even though she hasn't had any coffee all day. She may not have had any money or change in her pocket and might have to forego a coffee altogether. Broadly, if any people who are early, greedy or not altruistic and most companies are not altruistic they're seeking profit, then it seems rather an unfair system on the person who has to pay because they didn't get their coffee early enough.

Justin Hayden Miller: 22:59

And the same applies to this European Union scheme, the importations of steel into the European Union. There is a quota system for each type of steel product, not by importation per person, but globally. If the quota is exceeded, the person importing must pay generally much higher tariffs, irrespective of whether he or her has already imported steel or not. Once it's used up, bam, any extra steel tariffs get slapped on with a higher tariff, ordinarily 25% at the moment. That's the over quota rate. It's a shield against cheap imports. You're thinking well, europe is deliberately complicated, right, and I agree it can be pretty complicated, and you're saying it justifies the US potentially taking a position against the EU. But you see, this EU quota system was introduced in July 2018 as a response to President Trump himself imposing tariffs on steel imports. It wasn't even necessarily retaliatory or punitive. When a country such as the US puts tariffs on steel, suppliers in the market have the incentive of selling it and importing it somewhere else, such as in Europe. This is what we call trade diversion. This in itself threatens as a consequence for the EU steel industry. The European Commission therefore put in place this scheme to safeguard it. It was initially set to expire in 2021, but has already been extended on multiple occasions because of COVID-19 and overcapacity and other reasons.

Justin Hayden Miller: 24:44

The expression nerves of steel is used to describe someone who remains calm and composed under pressure or in the face of danger, a person's capacity to handle emotional stress and resilience. In the 18th century, nerve meant with courage and steadiness, and steel was added to the expression later to emphasise strength and toughness. Nerves of steel are surely currently required by traders grappling with the present volatility in the markets, but also by others in various contexts in today's world, including yourselves. But you know steel is not entirely rigid, which engineers call ductility. Ductility is the capacity of the steel to change its form under stress, its capacity to absorb an element of tension, its capacity to be able to bend a little without snapping, and so it may be that trade and other issues confronted by our world leaders today may not only depend on the steeliness of decision makers and of those in charge, but also on their ductility and their capacity to bend, if only a little, in order to get the best results for us all.

Justin Hayden Miller: 26:17

If you're listening to this, then thank you for having listened to the podcast from beginning to end. If you like it, do subscribe so you don't miss any episodes, and feel free to leave a rating. This will help others find it. You can find me on X at Justin Hayden, followed by the letter M, or send me an email at privilegeddiscussions at gmailcom. And if I didn't mention a legal caveat, then I wouldn't be worth tuppence as a lawyer. So here goes. The content of this podcast is intended only to provide an information resource of interest and does not constitute legal, tax, business or financial advice of any kind. Should you require advice, then you should engage in appropriately qualified person to provide you specific advisory services in the field. The views, thoughts and opinions expressed in this podcast are my own and do not necessarily represent the views, thoughts or opinions of any law firm, nor that of any third party, other person, company or organisation. Stay tuned for the next episode.