Barriers to exit in the steel sector

This paper explores the nature of exit barriers in the steel industry, their social and economic implications, and policy approaches to deal with exits and steel industry restructuring. Barriers to exit in the steel industry require attention due to their negative impacts on excess capacity. Such barriers mainly stem from government interventions that hinder the closure of inefficient or unviable steel plants, though cost factors specific to the steel industry are important barriers, as well. Exits may also entail important costs associated with redundancy payments to workers, environmental clean-up and operations to dismantle mills. The paper concludes with specific policy recommendations to promote adjustment, including removing subsidies and other government support measures that maintain unviable plants, assisting displaced steel workers into other activities, and other measures to limit the social costs of steel plant closures.