The Steel industry is the worldwide heavy industry that produces steel. Most of the steel is used in construction of factories, office buildings and bridges, and in automobiles, appliances and machinery. Demand for steel fluctuates greatly.
The U.S. steel industry is a $75+ billion business with 1200 companies, comprising about 5% of U.S. manufacturing. The steel industry (including iron production) uses 2-3% of all US energy consumption and has invested more than $7 billion in environmental controls. There are 20 large integrated mills producing steel in basic oxygen furnaces. The industry employs 154,000 people nationwide, with pay scales about 50% higher than average. Most grades of steel in use today – particularly high-strength steels that are lighter and more versatile – were not available ten years ago. Steel is the most recyclable and recycled material in North America, with an overall recycling rate of 68%.
China has 71 major steel producers; they were growing very rapidly for seven years with very high profits until the Financial Crisis of 2008 hit; the industry in 2008 has an annual capacity of 400 million tons, far more than demand.
While China has many large steelmakers, the industry is concentrated in most countries. In Japan the top 6 producers account for 90% of the country's steel output. In South Korea, Posko Steel Processing Center alone is responsible for 65% of the country's steel production. The top 6 steel producers in the European Union produce 74% of its steel. Only one company Arcelor produces almost all of the steel made in France.
The History of the Steel industry is part of the core history of industrialization around the world since the early 19th century.
Arnoux, (2001) shows how in mining and the metallurgical industry, the process of technical innovation and the growth of demand in the period 1450-1550 made possible the emergence of new types of production and commercialization, as happened in the iron-making industry with the diffusion of Walloon processes throughout northwestern Europe. The mechanization of the forge resulted in rising production of iron and steel for the interregional and international markets, an increasing use of wood, and a global process of salarization of the iron-workers. The growing authority of the forge masters over the workers in smelting and hammering plants signals the development of forges as industrial firms. This process was accompanied by strong intervention on the part of the state and other public institutions by way of orders, patents to protect innovations, and even state-owned industrial factories.[1]
The growth of pig iron output was dramatic. Britain went from 1.3 million tons in 1840 to 6.7 million in 1870 and 10.4 in 1913. The US started behind, but grew faster, with .32 million tons in 1870, 1,74 million in 1870, and 31.5 in 1913. Germany went from .19 million tons in 18509 to 1.56 in 1871 and 19.3 in 1913. France, Belgium, Austria-Hungary, and Russia, combined, went from 2.2 million tons in 1870 to 14.1 million tons in 1913, on the eve of the World War. During the war the demand for artillery shells and other supplies caused a spurt in output and a diversion to military uses.
Before about 1860 steel was an expensive product, made in small quantities and used mostly for swords, tools and cutlery; all large metal structures were made of wrought or cast iron. Steelmaking was centered in Sheffield, Britain, which supplied the European and the American markets. The introduction of cheap steel was due to the Bessemer and the open hearth processes, two technological advances made in England. In the Bessemer, or pneumatic, process, molten pig iron is converted to steel by blowing air through it after it was removed from the furnace. The air blast burned the carbon and silicon out of the pig iron, releasing heat and causing the temperature of the molten metal to rise. Henry Bessemer demonstrated the process in 1856 and had a successful operation going by 1864. By 1870 Bessemer steel was widely used for ship plate and rails.[2]
After 1890 the Bessemer process was gradually supplanted by open-hearth steelmaking and by the middle of the 20th century was no longer in use. The open-hearth process originated when the Siemens brothers of Germany used the heat in the waste gas exiting a furnace to preheat the entering fuel and air. By 1861 William Siemens experimented using an open hearth heated by a gas flame. By 1867 he had succeeded in making steel from pig iron and iron ore in an open hearth. In France in 1867 Emile and Pierre Martin, using a Siemens furnace, made good quality steel by melting wrought iron and scrap in an open hearth. The usual open-hearth process used pig iron, ore, and scrap, and became known as the Siemens-Martin process. The Siemens-Martin process allowed closer control over the composition of the steel; also, a substantial quantity of scrap could be included in the charge. The crucible process remained important for making high-quality alloy steel into the 20th century. Paul L. T. Héroult-Heroult in France and Fredrik Kjellin in Sweden adapted the electric arc furnace to steelmaking in 1900. By 1920 the electric furnace had largely supplanted the crucible process for specialty steels.
In 1875 Britain accounted for 47% of world production of pig iron and almost 40% of steel. 40% of British output was exported to the U.S., which was rapidly building its rail and industrial infrastructure. Two decades later in 1896, however, the British share of world production had plunged to 29% for pig iron and 22.5% for steel, and little was sent to the U.S. The U.S. was now the world leader and Germany was catching up to Britain. Britain had lost its American market, and was losing its role elsewhere; indeed American products were now underselling British steel in Britain.[3]
Abé, (1996) explores the record of iron and steel firms in Victorian England by analyzing Bolckow Vaughan & Company. The leading problem of the company was its focus on the wrong technology, not switching to the open hearth furnace method until long after the technology was developed. It is apparent that the company was not focused on long-term decision-making [4]
Blair (1997) uses the history of the British Steel Corporation (BSC) since World War II to illustrate the problem of government intervention in a market economy. Following the war it was difficult to persuade iron and steel companies to upgrade their plants despite the fact that the industry had followed a patchwork growth pattern that needed to be rationalized to improve efficiency in the face of world competition. In 1946 the first steel development plan was put into practice with the aim of increasing capacity, and the Iron and Steel Act of 1949 led to nationalization of the industry, but these measures were undone by Conservative governments in the 1950s. In 1967, under Labour control, the industry was again nationalized. But by then twenty years of political manipulation had left companies such as BSC with serious problems: a complacency with existing equipment, plants operating under capacity (low efficiency), poor quality assets, outdated technology, government price controls, higher coal and oil costs, lack of funds for capital improvement, and increasing world market competition. By the 1970s the government adopted a policy of keeping employment artificially high in the declining industry, and this was especially difficult for BSC as it was a major employer in a number of depressed regions. Eventually, in the 1980s BSC was re-privatized as British Steel. Under private control the company has dramatically cut its work force and undergone a radical reorganization and massive capital investment to again become competitive in the world marketplace.
In Australia, the Broken Hill Propriety Company Limited's (BHP's) Newcastle Iron and Steel Works was a major mill from its commissioning in 1915 until its closure in 1999. McIntyre (2005) looks at the boilermaker, his history and culture, his task, and the steelworks. Drawing on historical method, cultural studies, and social theory, McIntyre explores the world of the steelworks boilermaker as a species of industrial man, including the ideas, values, symbols, and practices which shaped his expectations, outlook, and actions as a skilled industrial worker.
The Ruhr Valley provided an excellent location for the German iron and steel industry because of the availability of raw materials, coal, transport, a skilled labor force, nearby markets, and an entrepreneurial spirit that led to the creation many firms, often in close conjunction with coal mines. In 1825 pig iron production in the Ruhr amounted to only 5% of total German output. By 1850 there were 50 ironworks with 2,813 full-time employees. The first modern furnace was built in 1849. The creation of the German Empire in 1870 gave further impetus to rapid growth, as Germany started to catch up with Britain. From 1880 to World War I, the industry of the Ruhr area consisted of numerous enterprises, each working on a separate level of production. Mixed enterprises could unite all levels of production through vertical integration, thus lowering production costs. Technological progress brought new advantages as well. These developments set the stage for the creation of combined business concerns.[5]
During the last third of the 19th century the most important factors for the growth of German industries and enterprises were mass production, the increased speed of capital flow, diversification of products, and technological progress. Many diverse, large-scale family firms were forced to reorganize in order to adapt to the changing conditions. In the 1870s, economic depression reduced the earnings in the German iron and steel industry. In 1873 and in 1878 the Haniel family, the owners of the GHH, modified the basic organizational structure of the company, and between 1872 and 1874 the Krupp family modified the structure of top management. In addition Alfred Krupp initiated a thorough reform and improvement of the accounting system as a result of a grave shortage of working capital. New guidelines were laid down for the accounting systems, a specialized bureau of calculation was established as well as a bureau for the control of times and wages and the so-called Rechnung-Revisions-Büro as methods of the revision of these calculations. The measures taken proved to be so elaborated and adequate to the existing conditions and the future changes in the economy, that the rival firm GHH wished to install similar organizational reforms.[6]
The establishment of the Vereinigte Stahlwerke (United Steel Works) by several major iron and steel corporations in 1926 was the most famous rationalization project in Germany. Previous research has stressed specific German lines of business organization, but the development of the United Steel Works until 1934 should be described as an Americanization of the German iron and steel industry. With regard to the company's internal structure, management strategies, use of technology, and transition to mass production there were many similarities to the US Steel Corporation. The United Steel Works in Germany developed a multi-divisional structure and aimed at return-on-investment as a measure of success. The management of this "old industry" company was at least as up to date as that of the better known corporations in the electrical industry. The important difference with regard to American was that consumer capitalism as an industrial strategy did not seem plausible to German steel industrialists.[7]
Stallbaumer, (1996) uses the Flick Concern's participation in the "aryanization" of Hochofenwerk L ubeck AG, and the Julius and Ignaz Petschek Braunkohle properties located in Germany for her case study of the relationship between industry and state in the Third Reich. By virtue of the state's ant-semitic policies, the Flick Concern was able to avail itself of a business opportunity which otherwise might not have existed. As a result of the deals which the Flick group negotiated, they were able to expand into pig iron production and Braunkohle operations which fit into the long-range expansion goals of this coal and steel firm. Throughout this process, the Flick group viewed the Nazi state as a tool which could be manipulated to their advantage if they adopted a cooperative attitude. However, as the "aryanization projects" became more protracted at the same time that Germany moved closer to war, the Flick group's ability to reach deals on their own terms became increasingly difficult. The complex picture which emerges from a detailed analysis of Flick's role in these "aryanizations" reveals that "understandings" with Nazi state officials were based upon the exigencies of the moment and that, in turn, made predictable results in the business world increasingly difficult. The Flick group's experience not only sheds light on the nature of industry-state relations, but it is also a microcosm of some dominant and consistent features of the Nazi state: rivalry for control of decision-making; the central role of autarkic goals in policy decisions; the determinative role of racial and etatist ideology; and the polymorphous character of policies against Jews.[8]
In Nazi Germany prisoners of war provided the main source of French forced labor at the beginning of World War II. The Germans turned also to the civilians in countries they had conquered to increase the labor force, notably in the metalworking industries, as early as autumn 1940. However, the lack of volunteers led the French government to introduce a law in September 1942 effectively deporting French workers to Germany, where, by August 1944, they constituted 15% of the labor force. While the proportion of French workers in civil and military positions reached its peak by 1943, they nevertheless maintained a significant presence in the steel- and ironworks, the largest number working in the giant Krupp works in Essen. Low pay, long hours, and often miserable living conditions in which poor housing, insufficient heating, and limited food supplies were frequent, combined with harsh discipline and inadequate medical facilities, became more prevalent by the end of the war.[9]
In 2006 Mittal Steel (based in London, but controlled by the Mittal family) acquired Arcelor, based in Luxembourg, for $38.3 billion to become the world's biggest steel maker, with operations throughout Europe, the U.S. and Asia.
French steel and metal industries revealed aspects of retardation, and these were more the result of social and economic attitudes than inherent geographic, population, or resource factors. Despite a high national income level, France did suffer from industrial retardation that weakened its economy.[10]
In Italy a shortage of coal led the steel industry to specialize in the use of hydro-electrical energy, exploiting ideas pioneered by Ernesto Stassano from 1898. Despite periods of innovation (1907–14), growth (1915–18), and consolidation (1918–22), early expectations were only partly realized. Electrical processes were an important substitute, yet did not improve competitiveness or reduce prices; instead, they reinforced the dualism of the sector and initiated a vicious circle that prevented market expansion.[11]
In Spain, iron and steel wire manufacturers provided a wide and heterogeneous range of products for agriculture, mining, and several industries (paper, flour products, and machinery) during the process of Spanish industrialization. Fernández Pérez, (2005) provides new data on the growth of this auxiliary sector for the years 1856-1935, a period that has been neglected in research on Spanish metallurgy. Of particular importance are data about Spanish iron and steel wire manufacturing workshops and factories and imports and exports. Topics addressed include technological change, geographical location, the entrepreneurial structure of this sector, collusive agreements, and the institutional environment.[12]
In Yugoslavia only by studying how enterprises worked in practice can the conditions undermining the economic system of socialist Yugoslavia be understood. The case of Metallurgical Kombinat Smederevo, a huge iron and steel enterprise that ran massive deficits, had low productivity, and saddled the republic of Serbia with foreign debt, is illustrative. The enterprise's losses resulted from an unbalanced production structure, its location and lack of access to raw materials, an inability to construct an efficient plant, service machinery, or manage spare parts inventories, and an orientation toward unprofitable exports. Because no one had the responsibility and incentive to improve efficiency the country continued to be saddled by its losses.[13]
Yonekura, (1990) shows the steel industry was central to the economic development of Japan. The nation's sudden transformation from feudal to modern society in the late nineteenth century, its heavy industrialization and imperialist war ventures in 1900-1945, and the post-World War II high-economic growth, all depended on iron and steel. The other great Japanese industries, such as shipbuilding, automobiles, and industrial machinery are closely linked to steel. From 1850 to 1970, the industry increased its crude steel production from virtually nothing to 93.3 million tons (the third largest in the world).
Many analysts credited the role of the government and especially the activist Ministry of International Trade and Industry. However, the successful transfer of technology from the West and the establishment of the competitive firms involved far more than were transporting hardware from one continent to another, or of the government's shrewdly building steel mills. For modern capital intensive industries, such as the iron and steel, technological and organizational capabilities were absolute prerequisite to achieve competitiveness. Japan internally developed the necessary technological and organizational capabilities, planned the transfer and adoption of technology, and gauged demand and sources of raw materials and finances.
The post-WW2 development of the industry proved to be the historical solution to a long-standing problem, the unbalanced development between iron and steel production. This historical solution was not initiated by the government but by one entrepreneur, encouraged by the postwar discontinuities and the prewar technological and organizational capabilities. The Japanese government learned from the over-controlled economy during World War II how not to control private firms.
The Indian steel industry began expanding into Europe in the 21st century. In January 2007 India's Tata Steel made a successful $11.3 billion offer to buy European steel maker Corus Group PLC.
From 1875 to 1920 American steel production grew from 380,000 tons to 60 million tons annually, making the U.S. by far the dominant world leader. The annual growth rates 1870-1913 were 7.0% for the US; 1.0% for Britain; 6.0% for Germany; and 4.3% for France, Belgium and Russia, the other major producres. This explosive growth rested on solid technological foundations, assisted by other factors, including (according to steelmen) the protective tariff and the continuous rapid expansion of urban infrastrures, office buildings, factories, railroads and other sectors that increasingly demanded steel. A key element was the easy availability of iron ore, coal, and manpower. Iron ore of fair quality was abundant in the eastern states, but the Lake Superior region contained huge deposits of exceedingly rich ore; the Marquette Range was discovered in 1844; operations began in 1846. Other ranges were opened by 1910, including the Menominee, Gogebic, Vermilion, Cuyuna, and, greatest of all, (in 1892) the Mesabi range in Minnesota. This iron ore was shipped through the Lakes to ports such as Chicago, Detroit, Cleveland, Erie and Bussalo for shipment by rail to the steel mills. Abundant coal was available in Pennsylvania and Ohio. Manpower was short. Few Americans wanted to work in the mills, but immigrants from Britain and Germany (and later from Eastern Europe), arrived in great numbers.
In 1869 iron was already a major industry, accounting for 6.6% of manufacturing employment and 7.8% of manufacturing output.
Andrew Carnegie, an immigrant from Scotland, was a salesman, promoter and financier, but not an engineer; he did not directly supervise his steel mills. His company's great innovation was in the cheap and efficient mass production of steel rails for railroad lines. It was based in Pittsburgh, Pennsylvania, the center of the American industry until the late 20th century.
In the late 1880s, Carnegie Steel was the largest manufacturer of pig iron, steel rails, and coke in the world, with a capacity to produce approximately 2,000 tons of pig metal per day. In 1888, Carnegie bought the rival Homestead Steel Works, which included an extensive plant served by tributary coal and iron fields, a 425-mile (685 km) long railway, and a line of lake steamships. A consolidation of Carnegie's assets and those of his associates occurred in 1892 with the launching of the Carnegie Steel Company.
By 1889, the U.S. output of steel exceeded that of Britain, and Andrew Carnegie owned a large part of it. By 1900, the profits of Carnegie Bros. & Company alone stood at $40,000,000 with $25,000,000 being Carnegie's share. Carnegie's empire grew to include the J. Edgar Thomson Steel Works, Pittsburgh Bessemer Steel Works, the Lucy Furnaces, the Union Iron Mills, the Union Mill (Wilson, Walker & County), the Keystone Bridge Works, the Hartman Steel Works, the Frick Coke Company, and the Scotia ore mines. Carnegie, through Keystone, supplied the steel for and owned shares in the landmark Eads Bridge project across the Mississippi River in St. Louis (completed 1874). This project was an important proof-of-concept for steel technology which marked the opening of a new steel market.
See also US Steel
By 1900 the US was the largest producer and also the lowest cost producer, and demand for steel seemed inexhaustible. Output had tripled since 1880, and prices fell. Productivity-enhancing technology encouraged faster and faster rates of investment in new plants. However, during recessions, demand fell sharply taking down output, prices, and profits. Charles M. Schwab of Carnegie Steel proposed a solution: consolidation. J. P. Morgan and Elbert Gary led the team that worked with Carnegie and Schwab to create United States Steel, by far the largest non-railroad corporation in the world in 1901.
US Steel combined finishing firms (American Tin Plate, American Steel and Wire, and National Tube) with two major integrated companies, Carnegie Steel and Federal Steel. It was capitalized at $1.466 billion, and included 213 manufacturing mills, one thousand miles of railroad, and 41 mines. In 1901, it accounted for 66% of America's steel output, and almost 30% of the world's. During World War I, its annual production exceeded the combined output of all German and Austro-Hungarian firms.
see also Bethlehem Steel
Charles Schwab (1862- 1939) and Eugene Grace (1876–1960) made Bethlehem Steel the second-largest American steel company by the 1920s. Schwab started with Carnegie Steel and by 1897 was its president. He became the fiorst president of US Steel in 1901; Judge Gary was his boss. He left to become head of Bethlehem Steel in 1903; it concentrated on government contracts, such as ships and naval armor, and on construction beams. From 1945 to 1959, Bethlehem's capacity rose from 13 million tons a year to 23 million tons from 1945 to 1955, reflecting the widespread optimism in the steel industry. However the company refused to invest in new technologies then being developed in Europe and Japan. Seeking labor peace in order to avoid strikes, Bethlehem like the other majors agreed to large wage and benefits increases that obliged them to raise prices at a time when the foreign steel companies had just begun to challenge their American counterparts. As Bethlehem's comptroller explained, "We're not in business to make steel, we're not in business to build ships, we're not in business to erect buildings. We're in business to make money." The company's president Arthur Homer explained in 1962, that Bethlehem was profitable enough and did not need to innovate. All the plants were making money. "We have a nice business as it is," he boasted. The problem was that short term profits meant avoiding innovations and that led to long-term competitive weaknesses.
Cyrus Eaton (1983-1979) in 1925 purchased the small Trumbull Steel Company of Warren, Ohio, for $18 million. In the late 1920s he purchased undervalued steel and rubber companies. In 1930, Eaton consolidated his steel holdings into the Republic Steel Company, basedin Cleveland; it became the third-largest steel producer in the U.S., after US Steel and Bethlehem Steel.
Growth continued at a rapid rate but other industries grew even faster, so that by 1967, as the downward spiral began, steel accounted for 4.4% of manufacturing employment and 4.9% of manufacturing output. By 2001 steel accounted for only 0.8% of manufacturing employment and 0.8% of manufacturing output.
Three tons of high-grade ore yields two to three tons of high iron concentrate, in taconite mining 3 tons of crude ore is required to produce one ton of a high iron concentrate, or pellet, for furnace feed. Nevertheless, advances in processing technology, combined with large-scale mining operations using oversized machines, made taconite, which is abundant in Minnesota, competitive with the high-grade foreign ores; it replaced the lower-grade domestic ores.
After 1970 American steel producers could no longer compete effectively with low-wage producers elsewhere. Imports and mini-mills undercut its sales. Most mills were closed. Bethlehem went bankrupt in 2001. In 1984, Republic merged with Jones and Laughlin Steel; the new firm went bankrupt in 2001. US Steel diversified into oil (Conoco Oil was spun off in 2001). Finally US Steel reemerged in 2002 with plants in three American locations (plus one in Slovakia) that employed fewer than one-tenth the 168,000 workers of 1902.
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