by Vaclav Smil
Nucor has become America’s most diversified steel producer—supplying everything from highway products, building systems, joists, and decking to rebar, wires, plates, sheets, and pilings—as well as the market leader in nearly a dozen product categories (Nucor, 2014). The company operates in more than 200 locations throughout the country. In 2015 it employed more than 20,000 people and had sales of nearly $900,000 per employee. Another bit of relatively good news: US employment in the iron and steel industry has stabilized, and in 2015 it was about 150,000 workers (AISI, 2015). American steel companies have not been the only ones experiencing downgrading in the global ranking.
Nippon Steel Corporation was the world’s largest steelmaking enterprise in 1990 and kept that place a decade later, but it is now (after its 2012 merger with Sumitomo Metal Corporation, creating NSSMC) in second place, behind ArcelorMittal, the company created in 2006 by the merger of Mittal Steel (founded in 1976 by Lakshmi N. Mittal in India) and Arcelor, a European steel giant that was, in turn, formed in 2002 by merging Arbed (Luxembourg), Acelaria (Spain), and Usinor, France’s largest steel producer, which had merged with Sacilor in 1986 (ArcelorMittal, 2015). In 1990 four of the top 10 steelmakers were Japanese; in 2013 only two remained (with JFE, established by the merger of Nippon Kōkan and Kawasaki Steel in 2003, in tenth place).
Those European steelmakers which have not been bought by Mittal have fared much worse. In 1990 four companies ranked among the top 10—UsinorSacilor as number two, British Steel as number four, Italian Ilva group as number seven, and Germany’s ThyssenKrupp as number eight—but none remained by 2013 when ThyssenKrupp ranked 21st, Riva (which acquired Ilva) ranked 46th (and in 2015 the Italian government decided to take over Ilva’s operations), and British Steel did not make it to the top 50 (WSA, 2015). Just 150 years after the steelmaking revolution began, the country whose metallurgists, engineers, and workers launched it is producing less steel than Iran or Mexico, and only about a third of the Turkish output!
The first principles make the entire industry subject to significant economies of scale (costs per unit of output fall with increasing capacities): as all (blast, oxygen, electric arc) furnaces grow larger, their volumes obviously increase faster (x3) than their surfaces (x2), which means that capacity grows faster than investment and maintenance cost (Carlton & Perloff, 2005). Even so, high capital investments needed for new integrated steelmaking plants (especially for new blast furnaces) constitute a significant structural barrier to entry, a reality made more difficult by price fluctuations of steel products (Egenhofer et al., 2013). Not surprisingly, the greatest (and most unprecedented) expansion of new ironmaking capacities took place in China with the government’s implicit direction and support: no private enterprises of that scale in China are truly private.
From WW I to the End of WW II
In 1914 the global steel output was more than 25% below the 1913 level, but the wartime demand for weapons and ammunition led it to rise to a new record of 82 Mt in 1917 because of increases in European production. In 1917, when the United States entered the war, its pig iron production was actually about 2% lower than in 1916, and in 1918 it grew by only 1% (Kelly & Matos, 2014). The wartime global high was followed by large output fluctuations, with the total sinking to 58.5 Mt in 1919 and just 45.2 Mt in 1921, and rising to 72.5 Mt in 1920 and to a new record high of 93.4 Mt by 1925. The US iron industry was responsible for a large share of these ups and downs: in 1921 it produced 55% less than in the previous year, and in 1924 it shipped 22% less than in 1923.
Notable changes introduced by the US ironmakers included a further steepening of the bosh angle, increase in furnace heights and hearth diameters, and efficient removal of dust (King, 1948). In 1918 the South Works No. 6 furnace had a total volume of 776 m3, bosh angle of just over 82°, and hearth diameter of 6.25 m; it produced about 605 t of pig iron a day (with coke:iron ratio of 0.89 by weight), its blast rate was 1250 m3 at 600°C, and its charge was just Mesabi iron ore. The next generation of furnaces during the late 1920s extended the hearth diameter to 7.5 m: Ohio No. 2 had a volume of 1205 m3 and produced about 980 t/day (coke:iron ratio of 0.8); its blast rate was 2045 m3 and Mesabi ore made up about 70% of its charge. Larger furnaces required improvements in handling and charging of raw materials and removing the hot metal in large ladles. The capacity of the first brick-lined ladles grew from nearly 10t to nearly 70 t; during the 1920s came the ladles with capacities of 125–150 t.
Another early American contribution solved a troublesome problem of cleaning blast furnace gases to a much higher degree of purity than it was possible to do by primary washers. The first electrostatic precipitators were designed just before WW I by Frederick G. Cottrell (1877–1948) when he was working at the US Bureau of Mines, and the first commercial installation was at a manganese plant in 1919, with blast furnace application coming soon afterwards (King, 1948). Precipitators rely on a simple ingenious method of charging plates or tubes (cathodes) and cables spaced between them (anodes), with dust deposited on cathodes and regularly shaken off for removal. This efficient cleaning method began in the 1920s and was later adopted to remove fly ash from coal-fired power plants (with efficiencies up to 99.9%, replacing dark plumes by condensed CO2-rich steam) and cement factories.
New all-time production records were finally set, after four years of steady increases, in 1929: 38.7 Mt of pig iron and 50.3 Mt steel in the United States and 98.5 Mt of pig iron and 120.8 Mt steel worldwide. Maturation and expansion of car industry was a major source of new demand for steel as the designs shifted to fully enclosed, streamlined automobiles whose bodies were made of sheet steel and whose heavier chassis added to the total mass of the metal needed per vehicle. This conversion was aided by the introduction of a “universal” steel, a chromium-molybdenum alloy: several carbon grades of this steel could be used in all parts of vehicles, lowering the cost of procurement and production (Misa, 1995). In the United States three other notable drivers of steel demand during the 1920s were the widespread construction of new skyscrapers, the doubling of electricity generation, and the massive acquisition of household appliances, including washing machines, vacuum cleaners, and refrigerators, whose sales rose from just 10,000 to nearly 800,000 units between 1920 and 1929 (Hogan, 1971).
But this rise was interrupted by the worst economic crisis of the modern era: industrial production contracted (in the United States by 46% between 1929 and 1932), and iron and steel industry, its fundamental precursor, suffered an even greater decline. In the United States the 1932 output of 12.4 Mt of steel was lower than at any time since 1904, and by 1938 it was still below the 1915 level (Kelly & Matos, 2014). Between 1931 and 1936 55 US blast furnaces, capable of producing nearly 6.5 Mt of pig iron, were abandoned, and the number of idle furnaces peaked in 1932 with 235 units (only 44 were operating). The total number of active furnaces in 1929 was not surpassed until 1939 (Hogan, 1971).
Similar output declines, furnaces abandonments, and idling were experienced in the United Kingdom and France. Worldwide output fell by nearly 60% between 1929 and 1932, but a new record was set in 1937 as the USSR, Germany, and Japan expanded their production. But even during the crisis years, car industry was laying down the foundation for future expansion through continued optimization of assembly lines (resulting in higher productivity and lower car prices) and the diffusion of American designs abroad: in 1931 Ford opened an assembly plant in the United Kingdom (in Dagenham in Essex), and in 1932 it opened one in the USSR (in Nizhny Novgorod), and during the 1930s the notable visitors who studied the organization of Ford’s massive River Rouge plant included Giovanni Agnelli (1921–2003; future CEO of FIAT) and Kiichiro Toyoda (1894–1952; future president of Toyota Motor Company).
In the USSR the Stalinist quest for rapid industrialization was based on the fastest possible development of heavy industries in general, and iron and steel in particular. By 1928 Soviet iron and steel production was still below the 1913 level (3.3 vs. 4.2 Mt pig iron, 4.0 vs. 4.2 Mt steel)
, and the first five-year plan (1928–1932) envisaged increases to 10 Mt of iron and 10.4 Mt of steel, but only about 60% of these goals were met, with 6.2 Mt of iron and 5.9 Mt of steel (Dunayevskaya, 1942). During the 1930s the USSR established a modern steel base in Magnitogorsk (southeastern Ural region) based on the design of the US Steel mill in Gary, Indiana. By 1937 the country produced 17.7 Mt of steel, and Magnitogorsk, deep in the rear, was indispensable for producing steel for the country’s victorious war against Nazi Germany.
German wartime steel production peaked at 19 Mt in 1918; the output was around 15 Mt in the mid-1920s. In 1926 German steel industry coalesced into Vereinigte Stahlwerke, a conglomerate of metallurgical and mining companies modeled on US Steel; it was partly nationalized in 1932, and it became the principal provider of the indispensable metal for the country’s large-scale rearmament that followed Hitler’s rise to power (in 1933) and then to an overt preparation for and conduct of a new European war. Steel output rose from the crisis low of 6 Mt in 1933 to the wartime peak of 22 Mt in 1940 and then declined to 18 Mt in 1944 as a result of the Allied bombing. But large aggregate pre–WW II German gains were much less impressive in relative terms: in 1937 the United States consumed nearly 400 kg/capita, Germany about 290 kg, and the USSR about 105 kg.
And even during the crisis years of the 1930s new demand for US steel was created by the railways switching from steam locomotives to diesel traction, and from heavy road transport changing from gasoline- to diesel-powered trucks. The first shift was exemplified by GM’s powerful locomotive (448 kW) pulling Pioneer Zephyr, the world’s first stainless streamlined train, which set new average intercity speed records in 1934 (Smil, 2006). US adoption of diesel trucks lagged behind Europe, and Kenworth Motor Truck Company was the first maker of American diesel trucks, starting in 1933. The United States entered WW II on December 9 after the Japanese attack on Pearl Harbor, but prior to that it was already helping to arm the United Kingdom and it had begun to mobilize for what was increasingly looking to be an unavoidable conflict.
Most of the metal required by America’s war effort came from capacities built since the 1920s, but new blast furnace designs, whose output dominated the first postwar decade before the Japanese ironmakers built their new models, were introduced at two new furnaces at Edgar Thomson Works in Braddock, Pennsylvania, in 1943. Each furnace had a total volume of 1446 m3, a hearth diameter of 8.25 m, and a hearth area of 53.5 m2, produced 1260 t of hot metal daily using a blast volume of 2440 m3, and was charged only with Mesabi iron ore. Steel-based performance of America’s war procurement was impressive. Direct mill shipments to shipbuilding industry rose more than 12-fold between 1940 and 1943 (Hogan, 1971). By 1944 American shipyards were launching 17 times as many ships as in 1939, production of munitions was 20 times, and aircraft completion was 28 times higher (Tassava, 2008).
But the overall steel output rose much less—by 28% in 1940 (to 78 Mt), and its wartime peak (81.3 Mt in 1944) was less than 5% above that level—because the metal, and all other requisite raw materials, previously used for consumer items ranging from cars to refrigerators was diverted to war uses. A single comparison illustrates steel’s contribution to American victory: during WW II the United States produced 6.6 times more munitions than Germany (Gatrell & Harrison, 1993). In 1944, the peak wartime production year, the United States produced nearly 50% of the world’s steel, and that share rose to nearly 72% in 1945 as the blast furnaces and steel mills in the two defeated powers, Germany and Japan, were severely damaged during the war.
America’s Postwar Retreat
American designs dominated the development of new blast furnaces until the late 1950s. The first important postwar ironmaking innovation was the introduction of smelting under pressure (70–140 kPa) by the Republic Steel in 1947–1948. This innovation led to considerable savings of coke. Other operational advances of American pig iron industry of the 1950s included the use of highly beneficiated ores, enrichment of blast air by oxygen, injection of gaseous or liquid fuels into blast furnaces, better refractories, automated plug drill, carbon hearth lining, and better automated process control (Gold et al., 1984).
Obviously, America’s dominance of global steelmaking could not last, and it began to decline almost immediately with the postwar recovery of Europe and, a few years later, of Japan, and with continued industrialization of the USSR. By 1955 the United States produced 39% of all steel, and by 1973 its share fell just below 20%. The United States remained the world’s largest steel producer until 1970; the USSR claimed the top spot during the next 2 years, and the United States regained the top position just for 1 year in 1973 when it produced the record amount of 137 Mt. As it soon became clear, that achievement reflected the industry’s large capacity and its past accomplishments; it was not the foundation of further progress. Just the opposite was true.
As all modern economies were affected by OPEC’s sudden oil price rise in 1973–1974 the US pig iron retreated: by 1975 it was 21% below its 1973 peak, and, after a few years of fluctuation, it began to decline even more rapidly in 1982 (dropping by 41% in a single year). After reaching the peak output of 137 Mt in 1973, America’s raw steel production was halved by 1982 (with more than 60% of that drop taking place in a single year), as was the total number of workers in iron and steel industry, to fewer than 200,000 (Haller, 2005). Stagnation and decline of America’s steel production was strongly related to the retreat of domestic carmaking, the country’s largest manufacturing industry, exemplified by the shares of the market taken by GM, the world’s largest auto maker: the company’s dominance peaked in 1960 with nearly 50% of all cars sold, by 1980 its share was just above 40%, and by the year 2000 it fell to less than 30%.
Hall (1997) called the years between 1975 and 1989 “Melting down: The end of ‘Big Steel’ in the United States.” The decades-long pattern of an industry dominated by a few large integrated iron-and-steel companies enjoying stable market share, generally rising demand, and control over pricing disappeared with a speed that was totally unanticipated by the industrial leaders and the powerful unions alike. General obsolescence of America’s ironmaking and steelmaking plants (most notably, as I will explain later in this chapter, their continued reliance on open hearths and tardiness in introducing basic oxygen furnaces), complacency of the leadership of large companies used to decades of market dominance, and high wages driven by aggressive, strike-prone unions collided with weakening domestic demand, rising low-cost high-quality imports, the emergence of highly competitive domestic mini-mills, and new requirements for more stringent environmental controls.
The rest of the twentieth century saw a few years of temporary production increases, but by the century’s end the US pig iron output of 47.9 Mt was just 52% of the record 1973 level, and afterwards it continued to fall, sinking to just 19 Mt during the economic crisis of 2009. Just 2 years later it was once again above 30 Mt, but in retrospect it is painfully clear that the American industry was forced to make a belated fundamental break, moving away from traditional integrated (blast furnace-based) steelmaking and rebuilding itself as a vigorous recycler of scrap metal. Hall (1997, 336) described the new situation correctly when he concluded that
the term “steel industry” itself may be obsolete. The industry is, on one hand, part of a broader metals or even materials industry … on the other hand, the industry is seeing vertical de-integration as the historic links among raw materials, steelmaking, rolling, processing and distributing become unravelled.
American steel industry remained depressed during the 1980s, but by 1994 it was above 90 Mt/year. By the century’s end the United States had 40 blast furnaces, compared to 452 in 1920, and although their productivity was an order of magnitude higher, their total pig iron output in 1999 was less than 40% above the level in 1920. But as EAF production prospered, total steel output rose to 102 Mt in the year 2000 before it resumed, once again, its decline during the first decade of the twenty-first century: during the economic crisis of 20
09 it fell to just 59.4 Mt, and although the output was back to 87 Mt in 2013, it accounted for only 5.4% of the global output, slightly better than the record low of 4.8% in 2009 (Kelly & Matos, 2014). But the jobs have not returned: productivity gains through technical advances and automation made many mills more competitive and assured their continued survival, but they have also resulted in mass-scale job losses. The total employment in the industry fell from 521,000 in 1974 to 204,000 by 1990, and since the year 2000 it has been mostly just above 150,000 as the remaining integrated plants employ a fraction of their former labor force.
America’s largest integrated steel mill, Gary Works in Gary, Indiana, has been in operation for more than a century, specializing in high-quality steel production (Fig. 4.1). In 1950 the mill employed 30,000 workers and it had a capacity of 6 Mt/year; in 2015 it employed just 5000 workers but its annual capacity was 7.5 Mt (USS, 2015). In 2015 the company closed its coke-making operation, laying off 300 workers. And the country’s largest blast furnace, Bethlehem’s old L unit at Sparrow Point plant in Maryland, was shut down by its Russian owners (Severstal) in July 2010 (Bethlehem Steel had already filed for bankruptcy in 2001), and it was demolished in January 2015 (Wood, 2015). Closures of traditional integrated (blast furnace-steelmaking) works and the rise of minimills also took place in Europe and Japan, but American job losses were relatively larger (77% decline between 1974 and 2000) than in Japan or Germany, where the cuts amounted to, respectively, 63% and 67% (Herrigel, 2010).
Figure 4.1 Gary Works of the US Steel Company in Gary, Indiana. Corbis.
