Iron and Steel Industry
IRON AND STEEL INDUSTRY
IRON AND STEEL INDUSTRY. Iron and steel, although closely related, are not the same thing. Iron begins as iron ore, which is melted in a blast furnace and blown through with air. Then it is manipulated so as to limit its content of carbon and other impurities. Steel is a particular kind of iron that is approximately one percent carbon, with the carbon content spread throughout the metal evenly. Steel is harder than iron and does not rust as easily. However, for most of history steel was harder to make than iron. That is why ironmaking was by far the bigger industry in America until the late nineteenth century.
The first iron works in America, called Hammersmith, began operation in 1647 in Saugus, Massachusetts, but lasted only five years. Subsequent ironmaking firms would be small operations that tended to be located close to local ore supplies, water power, and major transportation routes. Some of the most important ironmaking regions of the country in colonial America were in eastern Pennsylvania near the Delaware River, western Pennsylvania around the Allegheny and Monongahela Rivers, and the Hudson River valley in New York and New Jersey. Most of these firms remained small because of the high cost and low efficiency of available fuel to run their furnaces. When Americans switched fuels from charcoal or wood to coal in the early nineteenth century, larger operations became possible. The discovery of huge iron ore deposits in the northern Great Lakes region during the 1840s gave a further boost to production.
The Expansion of Iron Production in the Nineteenth Century
The widespread adoption of puddling as a technique to make iron also contributed to growth in production. In the early days of American ironmaking, craftsmen used a method called fining to produce iron. This meant that the mixture of iron and slag expelled from a blast furnace was separated out by hammering it. Puddling involved adding iron oxide to the blast furnace charge because the chemical reaction made it easier to separate impurities from the iron. Puddlers did the separating by stirring the melted product with a long iron rod. The slag that rose was poured off the top and the iron at the bottom was shaped into balls. The balls were squeezed into iron bars that were worked into the mill's final product (such as rails or rods) by other workers. Puddling required many judgment calls based on experience. Therefore, it could take up to two years of training to become a skilled puddler. Many puddlers in the mid-nineteenth century were successful enough to later move into the ranks of owners.
Both fining and puddling were pioneered in Great Britain and adopted by American producers in subsequent decades. As they gained more experience, American iron-masters developed their own variations of these English techniques, depending on local resources like the quality of their iron and the efficiency of their fuel. A means of automating iron production was not developed until the 1930s.
In the nineteenth century, the American iron market produced a wide variety of products. Stoves, gun parts, cannons, and machinery were among key early uses for iron. Iron also played a crucial role in the development of railroads. Once again, the English pioneered techniques for making high-quality iron rails. In fact, American railroads imported all their rails from British mills until 1844. In 1857, John Fritz's Cambria Iron Works in Johnstown, Pennsylvania, created a technique to automate partially the production of iron rails. The resulting increase in productivity made the railroad boom of the next two decades possible.
Steel Manufacturing: Henry Bessemer and Andrew Carnegie
Before the Civil War, American manufacturers made only small quantities of steel. Because they were unable to master the demanding requirements to create steel through puddling, imports from England's Sheffield mills dominated the American market. That all changed with the application of the Bessemer process. Henry Bessemer was a British inventor who created a way to refine iron into steel using air alone in 1855. His machine, the Bessemer converter, blew air over molten iron from a blast furnace so as to remove impurities and create a substance of a uniform consistency. The American engineer Alexander Holley brought Bessemer technology to America in 1864, but did not perfect the Bessemer design until he created his first plant from the ground up as opposed to adapting an existing facility. This was the Edgar Thomson Works in Braddock, Pennsylvania. The mill, which opened in 1875, was the model for all subsequent Bessemer facilities.
Holley built the Edgar Thomson Works for Andrew Carnegie, who used it mostly to produce steel rails for the Pennsylvania Railroad. Carnegie's first experience in industry came when he invested in the iron business during the 1860s. His genius was to champion technological innovations like the Bessemer converter and the Jones mixer, which sped the delivery of iron from the blast furnace to the converter, in order to cut production costs and undersell his competitors. Carnegie also had a genius for picking good associates. For example, William R. Jones, the inventor of the Jones mixer, served as superintendent of the Edgar Thomson Works and was just one of many men who shared in Carnegie's business success.
Another Carnegie protégé, Charles Schwab, would go on to form Bethlehem Steel in 1904.
Carnegie's devotion to vertical integration also contributed to his success. His firm eventually controlled supplies of everything needed to make steel: iron ore and coal deposits; railroads to transport everything; and marketing networks for the finished product. By the 1890s, Carnegie Steel made more steel than the entire country of Great Britain. In 1900, its annual profit was $40 million.
Between the mid-1870s and the early 1890s steel replaced iron in more and more markets that iron had once dominated, such as rails and nails. The key reason for this was increased steel production. Accelerated by the innovations in Carnegie's mills, Bessemer steelmaking allowed firms to make thousands of more tons of metal per year than when iron had dominated the market. And because the Bessemer method required less skill than ironmaking, labor costs dropped too. As steel prices dropped dramatically, consumers increasingly chose the cheaper, harder, more durable metal.
As this trend accelerated, puddlers began to find that their skills were no longer needed. Steelmakers came to depend on immigrant labor, particularly workers from southern and eastern Europe. In the Homestead lockout of 1892, the only major union in the iron and steel industry, the Amalgamated Association of Iron and Steel Workers, made one last violent stand to prevent managers from driving the union out of the industry at Carnegie Steel's Homestead Works. Its effort failed. From 1892 to 1937, American steelmakers operated in an almost entirely union-free environment.
The U.S. Steel Corporation
As in other industries, many steel producers joined forces at the beginning of the twentieth century. However, the effect of the great merger movement in the American steel industry is particularly noteworthy. The United States Steel Corporation formed in 1901 when a group of firms dominated by J. P. Morgan decided to buy out Andrew Carnegie so that the latter would no longer undercut their selling price. Carnegie's take from the deal made him the richest man in the world.
U.S. Steel was the first business in history to be valued by the stock market at over one billion dollars ($1.4 billion, to be exact). This figure represented one sixty-seventh of the total wealth of the United States at that time. U.S. Steel controlled 72 percent of Bessemer steel production in the United States and 60 percent of the market in open hearth steel, a new steelmaking process that made steel in a furnace which achieved high heat by recycling exhaust gases. U.S. Steel's ten divisions reflected the diversity of steel products made at that time, including steel wire, steel pipe, structural steel (for bridges, buildings, and ships), sheet steel (which would go largely for automobile bodies in subsequent decades), and tin plate (once used for roofing shingles, it would increasingly go to make tin cans). Like Carnegie Steel, the U.S. Steel Corporation was also vertically integrated, with substantial interests in iron ore, coal, shipping, and railroads.
Although it held one of the largest monopolies in an age of monopolies, U.S. Steel deliberately let its market share decline over the first few decades of its existence to avoid dissolution through antitrust prosecution by the federal government. Even though the Justice Department filed suit against U.S. Steel in 1911, this policy helped it survive when the Supreme Court resolved the case in 1920. U.S. Steel's largest competitors took advantage of the policy and the opportunities afforded them by World War I to grow at U.S. Steel's expense. Bethlehem Steel, for example, grew big during the war by selling armaments to Europe and ships to the U.S. Navy. Nevertheless, other firms took their cues from U.S. Steel for everything from product prices to wages and labor policy. The American Iron and Steel Institute, the industry trade organization formed in 1911 and led by U.S. Steel chairman Elbert Gary, helped spread many of U.S. Steel's policies and practices.
An important effect of the corporation's dominance was its imposition of the Pittsburgh Plus pricing system upon the entire industry. This system dictated that all steel prices be based upon the costs of production and transportation from Pittsburgh, no matter where the steel was originally produced. This allowed producers based in Pittsburgh to compete with local producers all around the country, since these producers were unable to undersell steel made in markets that U.S. Steel dominated. Although its origins are obscure, Pittsburgh Plus was firmly in place by 1901 and U.S. Steel championed its continued existence. Despite losing a suit by the Federal Trade Commission in 1924, U.S. Steel fought to keep the Pittsburgh Plus system in place in a modified form until it lost a U.S. Supreme Court decision on the matter in 1948.
The Steel Industry and Organized Labor
Throughout the early twentieth century, steel executives were determined to prevent the return of organized labor to their industry. Managers fought off national organizing campaigns in 1901, 1919, and 1933 through a combination of the carrot and the stick. They used hard-nosed tactics like spies, blacklists, and the fomenting of racial strife along with softer policies like safety improvements and employee stock ownership plans. However, when the Committee on Industrial Organization (later the Congress of Industrial Organizations, or CIO) started the Steelworkers Organizing Committee (SWOC) in 1936, it used the impetus of the National Labor Relations Act (1935) to gain a foothold in U.S. Steel. Rather than risk a costly strike at a time when production was just beginning to recover from the Depression, U.S. Steel recognized the SWOC without a strike in March 1937.
Although many other steel producers followed the steel corporation's lead, its largest competitors did not. Firms like Bethlehem Steel, Youngstown Sheet and Tube, and Republic Steel were part of a group known as Little Steel, not because they were small, but because they were smaller than U.S. Steel. Rather than recognize the union on terms similar to those agreed to by their larger competitor, these firms started the Little Steel Strike of 1937. Despite violence, particularly the so-called Memorial Day Massacre in Chicago, the Little Steel firms won the strike relatively easily. However, government pressure during World War II to keep production moving forced each of these firms to recognize the SWOC's successor organization, the United Steel Workers of America (USWA), over the course of that conflict.
World War II and Postwar Decline
During World War II, industry production increased sharply because of steel's importance to war mobilization. Some of this increase was a result of production returning to full capacity after the depression, but new plants also came on line. For example, the government loaned the shipbuilder Henry J. Kaiser enough money to build the first steel mill on the West Coast so as to ensure his yards would have enough product to meet his many navy contracts. U.S. Steel used both its money and money from the federal government to expand its production capacity during the war, particularly around Pittsburgh. By 1947, the United States controlled 60 percent of the world's steelmaking potential.
When the war ended, steelmakers wanted to roll back union gains that the administration of Franklin D. Roosevelt had forced the industry to accept, but the USWA had grown too big to destroy. Between 1946 and 1959, the USWA struck five times in an effort to win higher wages and more control over workplace conditions for its members. Each of these strikes shut down the industry. The 1952 strike led to President Harry Truman's historic decision to seize the entire steel industry. The Supreme Court ruled this action unconstitutional in Youngstown Sheet and Tube Company v. Sawyer (1952). The 1959 dispute lasted 116 days and was the largest single strike in American history. As a result of these disputes, America's steelworkers were among the highest paid manufacturing employees in the country. The cost of these wage gains contributed to the collapse of the industry in subsequent decades.
Foreign competition also contributed to the industry's decline. Countries like Japan and Germany first became major players in the international steel market during the 1960s. Later on, countries like Brazil and South Korea would break into the American market to the detriment of domestic producers. Although friends of the American steel industry would often complain of unfair competition from abroad, foreign producers' use of new technology and the failure of American steelmakers to innovate also explain these developments. For example, two Austrian firms developed the Basic Oxygen Furnace (BOF) in 1952. This process, which used pure oxygen as the only fuel in the furnace, was much more efficient than the then-traditional open hearth method. No major American steelmaker adopted this technology until 1957. U.S. Steel, still the largest firm in the industry, did not commission its first BOF unit until 1964. Close proximity to cheaper raw materials was another advantage that foreign steel producers had over their American counterparts.
The collapse of the steel industry began in the late 1960s and has only grown worse since then. Old-line firms like Wisconsin Steel and Republic Steel went bankrupt and ceased operations. Even survivors like U.S. Steel closed old plants in order to cut back capacity. U.S. Steel's decision to buy two oil companies in the 1980s and then change its name to USX symbolized the company's break with its roots. The elimination of much of America's steel capacity devastated the communities that had depended on these mills, including Pittsburgh, Pennsylvania, and Youngstown, Ohio. The Monongahela River valley around Pittsburgh lost approximately thirty thousand jobs during the 1980s. Many of these workers experienced significant psychological distress as they went from having high-paying jobs to joining the ranks of the long-term unemployed. Alcohol and drug abuse, depression, and suicide all increased dramatically as deindustrialization progressed.
The only sector of the American steel industry to expand since the 1960s has been the mini-mills. These facilities use large electric furnaces to melt scrap steel and reshape it rather than making new steel from scratch. Among the advantages that mini-mills have over traditional facilities are lower start-up costs, greater freedom of location, and more flexible job organization. Because these facilities tend to be built in rural areas and because workers need fewer skills than those at larger mills, mini-mills tend to be nonunion. The Nucor Corporation of North Carolina, which operates in ten states (mostly in the South), has had great success filling this niche in the international steel market. As this technology has improved in recent years, mini-mills have been able to break into more and more markets that large producers once dominated. Because of global and domestic competition, it has become increasingly unlikely that the American steel industry will ever return to the way it was in its heyday.
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Hogan, William T. Economic History of the Iron and Steel Industry in the United States. 5 vols. Lexington, Mass.: DC. Heath, 1971.
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Tiffany, Paul A.. The Decline of American Steel: How Management, Labor, and Government Went Wrong. New York: Oxford University Press, 1988.
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"Iron and Steel Industry." Dictionary of American History. . Encyclopedia.com. (September 26, 2017). http://www.encyclopedia.com/history/dictionaries-thesauruses-pictures-and-press-releases/iron-and-steel-industry
"Iron and Steel Industry." Dictionary of American History. . Retrieved September 26, 2017 from Encyclopedia.com: http://www.encyclopedia.com/history/dictionaries-thesauruses-pictures-and-press-releases/iron-and-steel-industry
Iron production depended on the availability of smeltable ores and refining and casting techniques. For many centuries the highest-quality ore was haematite and the heat source for smelting was charcoal. Thus, for example, the weald of Sussex and the Cumbrian area, which both possessed the necessary resources, remained important centres of high-quality British production from the Middle Ages until the early 19th cent. However, mining of lower-quality ores supported the industry elsewhere.
When many areas became denuded of trees, efforts were made to find other fuels, notably coal, for smelting ores. Coal had only been used in fashioning iron previously. Experiments were undertaken by many ironmasters, including Dud Dudley in the 17th cent., but it was not until the early 18th cent. that Abraham Darby succeeded. The technique took many years to become economically worthwhile and only towards the end of the 18th cent. was coal usually used to smelt iron ores. The consequent quantity production at lower prices encouraged many developments in the uses of both wrought and cast iron.
The most famous centre of ironworking using coal was founded by Darby at Coalbrookdale (Shropshire). The adjacent iron bridge across the river Severn, designed and built by John Wilkinson, stands to this day. Wilkinson's pioneering efforts encouraged many innovators so that by the 1780s mills were erected with stressed iron members allowing height and scale in buildings, utilizing the principles of what came to be skyscraper engineering. One of the most spectacular buildings of iron was the Crystal Palace for the Great Exhibition of 1851.
Although unusual uses of iron for building purposes in the early 19th cent. impressed the public (iron-framed churches and wrought-iron Regency balconies), the more significant demands on the industry were supplying households with kitchen ranges, firebacks, and cooking utensils. During the 1830s and 1840s significant demand came from railways. These required iron for their tracks, locomotives, and as components for many kinds of equipment. The relationship of railways with the iron industry was close and continuous. However, such was the variety of demand for iron that the industry was never dominated by railway demands even at the heights of the mania in the 1840s.
Before 1850 manufacturers of many kinds of engineering products demonstrated the versatility of iron, either wrought or cast. During the 1820s, steam-engines made of iron and driving paddles gave an impetus to shipbuilding. In the middle of the century the Royal Navy received HMS Warrior, its first iron-clad warship. This was soon superseded by all-iron vessels of much greater size and mobility. From the mid-19th cent. the merchant navy ordered many iron ships, with greater speed and larger cargo capacity.
In the 1840s sheet iron plated with tin was invented. This gave rise to an industry, concentrated in south Wales and the west midlands, providing the basic material for many utensils for the kitchen, food-processing, and storage. The cutlery trade used iron for many products, reserving steel, a semi-precious metal, for cutting edges. The Bessemer process, patented in 1855, made mild steel a cheap and superior rival for wrought and cast iron in some products.
Iron continued to be in demand as the basic raw material for steel-making. However, steel had structural advantages and durability which iron lacked, and the railways adopted steel for their tracks. Research in steel manufacture produced metals for special purposes. Amongst these was stainless steel and, from the late 19th cent., a succession of armour plates evolved for warships, armoured cars, and tanks.
Iron continues to have a role in its own right for many engineering uses, ranging from building supplies to the structural beds for many machines, where its weight and strength make it ideal. Its cheapness keeps it in use. In the early 21st cent., challenges come not from other metals but from plastics.
Ian John Ernest Keil
"iron industry." The Oxford Companion to British History. . Encyclopedia.com. (September 26, 2017). http://www.encyclopedia.com/history/encyclopedias-almanacs-transcripts-and-maps/iron-industry
"iron industry." The Oxford Companion to British History. . Retrieved September 26, 2017 from Encyclopedia.com: http://www.encyclopedia.com/history/encyclopedias-almanacs-transcripts-and-maps/iron-industry