Question

In: Economics

give some reasons why u.s steel in the past preferred to own its iron or mines,...

give some reasons why u.s steel in the past preferred to own its iron or mines, and why it is now selling them off

Solutions

Expert Solution

There are reasons that US Steel preferred to own its iron ore mines in the past. The first reason is the prevention of opportunism and bringing the stability in the supply of iron ores for the further processing and transforming into the steel. It also helped in preventing price rise and bargaining power to be with the US Steel. The second reason is the cost of ownership,  operation and procurement. The cost of owning the mines and doing extraction was cheaper than the buying & procuring of the ores from the others. The third reason is the US Steel holding a competitive advantage in the market as it adds huge value to the company in the past.

Though, US Steel is selling off its iron ore mines, because now imports have become cheaper, than owning and managing these mines. Hence, it is a cause of losses being incurred to the US Steel if it owns the mines. As a result, the company has modified its strategy, opted to sell off its mines and import the volume of ores at a cheaper rates to reduce the cost of operation.



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