Running a basic-materials company can be thankless. Whether it competes in pulp and paper, in energy, in chemicals, or in mining and metals, it inevitably confronts mature markets, intense global competition, and continual pressure to cut costs. To make the task more trying, however hard such a company struggles to make its products distinctive, those products are invariably saddled with the dread "C" word: commodity.

Steel producers face the greatest challenge of all. Over the past decade, the global industry has earned only a 4 percent annual operating return on assets—half the rate of aluminum and pulp and paper. The entry of new players explains the low returns. Steel companies—including such market leaders as Posco (South Korea), China Steel (Taiwan), and Techint (Argentina)—have emerged as local champions in developing countries with relatively high rates of economic growth. Meanwhile, technological change has lowered barriers to entry for such companies as Nucor (United States), Riva (Italy), and Ispat International (based originally in Indonesia and now in the Netherlands).

The result is that almost 30 percent of the world’s steel now comes from new plants belonging to companies that didn’t exist 25 years ago. Such upstarts have entered a global market that...