U. S. Steel(US:X) Guo Tai Jun An Qi Huo·2025-08-12 09:37Report Summary 1. Investment Rating No investment rating information is provided in the report. 2. Core Viewpoints - In the 1980s, the Thatcher government in the UK and the Reagan government in the US implemented supply - side reforms to address the stagflation situation. These reforms shifted the policy focus from Keynesian demand management to supply - side and free - market economics, which affected industries such as steel and coal, leading to industry restructuring and ultimately promoting industry transformation and profitability improvement [2]. - Through "three removals, one reduction, and one supplementation" measures, including capacity reduction, inventory reduction, de - leveraging, cost reduction, and short - board supplementation, the two countries' economies recovered from stagflation and traditional industries achieved transformation and upgrading [8][15]. 3. Summary by Directory 3.1 Reform Background in the 1970s and 1980s - Stagflation in the UK and the US: In the 1970s, both countries faced stagflation, with low economic growth, high inflation, and rising unemployment. From 1973 - 1980, the UK's GDP grew at an average annual rate of only 1.74%, inflation reached 15.2%, and the unemployment rate exceeded 10%. The US had negative GDP growth in 1974, 1975, and 1980, with inflation peaking above 14% and the unemployment rate also exceeding 10% [6]. - Shift from Keynesian to Supply - Side Economics: Keynesian demand - side policies failed to control unemployment and instead increased deficits and debts. The supply side faced obstacles such as large - scale losses in state - owned enterprises, frequent strikes due to union monopolies, excessive government regulations, and high marginal tax rates. The Thatcher and Reagan governments launched supply - side reforms in 1979 and 1981 respectively to revitalize the supply side and promote economic recovery [8]. - Over - capacity and Losses in the Coal and Steel Industries: In the late 1970s, the UK and the US entered the "de - industrialization" stage. Traditional heavy industries such as steel and machinery manufacturing were severely affected by the Middle East oil crisis and faced cost shocks. They also faced competition from Japan and the "Four Asian Tigers" and needed to transform their energy structures due to environmental protection requirements [9]. 3.2 Reform Process: "Three Removals, One Reduction, and One Supplementation" - Capacity Reduction - Coal Industry: In the UK, the number of coal mines decreased from about 200 in 1980 to 65 in 1990, the number of miners dropped from about 230,000 to 49,000, and coal production decreased from 120 million tons to about 50 million tons. In the US, policies and market factors led to capacity reduction, such as the promotion of natural gas development and environmental protection requirements [17]. - Steel Industry: In the UK, the "Davignon Plan" and subsequent measures led to production cuts. The British Steel Corporation (BSC) was reformed, with reduced subsidies, capacity closures, and layoffs, and achieved profitability in 1986. In the US, environmental protection laws, tax reforms, and market competition led to capacity reduction, with 3800 million tons of nominal crude steel capacity withdrawn from 1983 - 1989 and 5280 million tons from 1986 - 2003 [18][19]. - Inventory Reduction: In the UK, Thatcher implemented the "right - to - buy" policy, selling about 140,000 public housing units from 1979 to 1987 and earning about £16 billion in revenue [20]. - De - leveraging: In the UK, the government reduced the government expenditure - to - GDP ratio from 43% in the early 1980s to 38% in the early 1990s and the deficit rate from 6% to 2%. In the US, the "Gramm - Rudman - Hollings Act" was passed in 1985 to control deficits [22]. - Cost Reduction - UK: The UK reduced the top marginal personal income tax rate from 83% in 1979 to 40% in 1988, the basic tax rate from 33% to 25%, and the corporate tax rate from 52% to 35%. - US: The US reduced the top marginal personal income tax rate from 70% in 1981 to 28% in 1986 and the corporate income tax from 46% to 34. It also carried out government institutional reforms and cut welfare spending [23]. - Short - board Supplementation - UK: The UK supported steel enterprises in mergers, acquisitions, and production layout optimization, promoting specialization and efficiency improvement. In 1988, the BSC was reorganized into specialized subsidiaries. - US: The SBIR program invested $2 billion annually in small - business R & D, promoting technological breakthroughs and job creation [24]. 3.3 Policy Effects - UK Steel Industry: From 1975 - 1988, UK steel capacity decreased by 11.87 million tons. In 1988, the number of converters decreased by 39% compared to 1975, but production increased by 35.8%. By 1986, the number of employees in the steel industry decreased by 77.4% compared to 1972. The industry achieved world - class levels in the 1990s and turned profitable [26]. - US Coal Industry: The concentration of coal enterprises increased, with the output share of large - scale coal enterprises rising. Production efficiency improved, the number of employees decreased, and coal exports increased. The US became a global benchmark for coal industry modernization in the 1990s [28]. - US Steel Industry: The industry's transformation laid the foundation for oligopolization, lightening, and high - end development in the 1990s. The CR4 of the steel industry increased from 35% in 1985 to 70% in 2000 [29].