I am not 'failing to understand' the point - I'm rejecting the point.
Said rejection is self-inconsistent, however. You are invoking history in a game that intentionally and drastically deviates from it in numerous other ways involving resources and accrual of factories.
HOI 4 allows for the complete conquest and control (with high compliance) of China. That even the most modernized + powerful nation in the world, one that surpasses any nation managed historically, STILL can't set up steel mills there 5-10 years after conquest is NONSENSE. Even more so when that same country can trivially setup up more synthetic rubber production than the natural resources in the game combined in the same timeframe.
I don't know what pan south-American nation that also holds the UK would look like in history and neither does anybody else here. But the game allows it, and allows it to have more IC than the USA. Yet that nation still can't extract existing iron ore not already in the game, anywhere.
You can't cite history as a refutation that such a nation should be capable of extracting more iron ore and be coherent. That's not how causality works and it's now how the game's mechanical design works.
What is the German players reason for the Norwegian campaign, if they could just build more steel mills in Bavaria ?
If this is a serious question, time is a finite resource in the game. More regular factories + conquered steel = more output than building steel mills rather than production factories.
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