Suddenly, it is not the customer who matters; it is the supplier. The stuff that arrives at the factory loading bay is now expensive; shortages and logistical logjams are playing havoc and the company that sells you a vital commodity is digging in its heels, refusing to renew a long-term contract without a big price increase.

It is time to start thinking about vertical integration. Owning every segment of the production process from metal mine to packaging plant is an unfashionable idea, but in some industries it is coming back with a vengeance.

Posco, the South Korean steelmaker, said yesterday that it had paid $440 million (£221 million) for 10 per cent of Macarthur Coal, which supplies a third of the coal used in the world's steel mills.

Posco is following others; Citic, the Chinese trading giant, has amassed a stake of 18 per cent in Macarthur, and Arcelor Mittal, the world's biggest millowner, has raised its holding in the Australian miner to just under a fifth.

These are defensive moves; the steelmakers are reacting to a tripling in the price of coking coal, an essential ingredient in steelmaking. They need coal as they need iron ore, a commodity that has doubled in price over the past year and is expected to rise further. Arcelor Mittal is pursuing relentlessly a strategy of vertical integration, developing iron ore mines in Mexico, Liberia and Senegal.

When the Mittal group first embarked on its expansion strategy, owning everything back to the mine was not a priority. Ore and coal were cheap and plentiful. Steel products were similarly cheap. Hot-rolled coil reached a 20-year price low of $200 a tonne about the turn of the millennium, but since then the price has risen almost sixfold.

Desperate to secure supplies of ore, Japanese and Chinese steelmakers are trying to muscle in on Australian iron ore developments. Chinalco, the Chinese metal giant, has bought 12 per cent of Rio Tinto.

Further down the supply chain, some manufacturers are taking it on the chin. The auto industry is pounded by soaring prices, steel, plastic, copper, rubber - they are all going up. In Detroit today there can only be nostalgia for a not-so-distant past of close integration between steel mill and car plant.

The evidence is at Rouge Steel, the Michigan works that supplied Ford's River Rouge plant. Rouge Steel was sold two decades ago to a buyout group, which in 2004 sold it on to SeverStal, the Russian steelmaker.

At Ford, steelmaking was part of an integrated supply chain from rock and coal to foundries and assembly lines. Henry Ford invested in iron ore in Michigan and coal in Kentucky.

It was not until the 1980s, when Asian steel began to arrive in America in large volumes, that Ford began to think about shedding Rouge.

But now the dynamics of supply chains are fundamentally skewed against distant operators. American steel mills are nicely profitable, thanks to the burden of shipping costs, which are keeping out Asian competitors.

Disaggregated, outsourced supply chains don't make much sense when the oil price exceeds $142 per barrel. The new trick is not just to tie in upstream suppliers but to sit cheek-by-jowl, if you can get away with it.

BASF has been ignoring the outsourcing fashion for decades, working away at its verbund strategy of integrating its chemical works to extract the last euro of added value from the process of cracking molecules and creating polymers.

During the oil price collapse of the late 1990s, the German conglomerate ignored clarion calls to dispose of Wintershall, its oil and gas subsidiary, arguing that it was somehow a good hedge to own a supplier of hydrocarbon feedstocks. It is no accident that today BASF is the world's top chemical group and there are few complaints about Wintershall.

Some industries, such as chemicals, lend themselves to integration and steel is a cost-plus business. Mills are processors of ore into metal and, as long as the raw materials remain expensive, the price is unlikely to collapse.

Even sluggish demand for cars in OECD countries should not weaken steel much, reckons Johan Rode, the Citigroup analyst, because the main driver of demand is the Asian infrastructure boom, not Western consumer markets.

In Asia, the Western business school obsession with focus has failed to take root even as established local industrial giants venture into foreign markets.

India's Reliance Industries has pursued a deliberate vertical integration strategy, from oil and gas production through petrochemicals, plastics and textiles. Two years ago, it ventured into retailing. In its forays into European markets, Tata Group bought Corus, the steelmaker, and subsequently invested in the motor sector with Jaguar and Land Rover.

Europe and America broke up and sold their industrial hardware in the 1990s as wave upon wave of cheap materials arrived from Asia. Few noticed that the container ships and bulk carriers were floating on a tide of very cheap oil. That has disappeared and now we need new industrial structures for a different reality.

carl.mortished@thetimes.co.uk

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