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Credits: Baltimore Sun

History of the modern steel industry

By History

Steel has become such an intricate part of our everyday life that it does not register in our conscious mind. For us at Sverdrup Steel alloys is what our workday is made up off.  Still this is a very current perspective and narrowed down to our niche.

To gain some perspective we would like to look at the history of the modern steel industry. Steel is an alloy composed of between 0.2 and 2.0 percent carbon, with the balance being iron.

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 and Middlesbrough, Britain, which supplied the European and American markets. The introduction of cheap steel was due to the Bessemer and the open hearth processes, two technological advances made in England.

Bessemer steel was widely used for ship plate. By the 1850s, the speed, weight, and quantity of railway traffic was limited by the strength of the wrought iron rails in use. The solution was to turn to steel rails, which the Bessemer process made competitive in price. Experience quickly proved steel had much greater strength and durability and could handle the increasingly heavy and faster engines and cars.

Bessemer Converter, outside entrance to Kelham Island Museum, Sheffield

Britain

19th Century

Britain led the world’s Industrial Revolution with its early commitment to coal mining, steam power, textile mills, machinery, railways, and shipbuilding. Britain’s demand for iron and steel, combined with ample capital and energetic entrepreneurs, made it the world leader in the first half of the 19th century.

In 1875, Britain accounted for 47% of world production of pig iron, a third of which came from the Middlesbrough area 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.

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 from a lower base, but grew faster; from 0.3 million tons in 1840, to 1.7 million in 1870, and 31.5 million in 1913. Germany went from 0.2 million tons in 1859 to 1.6 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.

“In 1875, Britain accounted for 47% of world production of pig iron”

Germany

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 of many firms, often in close conjunction with coal mines. By 1850 the Ruhr had 50 iron works with 2,813 full-time employees. The first modern furnace was built in 1849. The creation of the German Empire in 1871 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.

The leading firm was Friedrich Krupp AG run by the Krupp family. Many diverse, large-scale family firms such as Krupp’s reorganized in order to adapt to the changing conditions and meet the economic depression of the 1870s, which reduced the earnings in the German iron and steel industry. Krupp reformed his accounting system to better manage his growing empire, adding a specialized bureau of calculation as well as a bureau for the control of times and wages. The rival firm GHH quickly followed, as did Thyssen AG, which had been founded by August Thyssen in 1867. Germany became Europe’s leading steel-producing nation in the late 19th century, thanks in large part to the protection from American and British competition afforded by tariffs and cartels.

From Krupps turret factory in Essen before WW1

By 1913 American and German exports dominated the world steel market, and Britain slipped to third place. German steel production grew explosively from 1 million metric tons in 1885 to 10 million in 1905 and peaked at 19 million in 1918. In the 1920s Germany produced about 15 million tons, but output plunged to 6 million in 1933. Under the Nazis, steel output peaked at 22 million tons in 1940, then dipped to 18 million in 1944 under Allied bombing. The merger of four major firms into the German Steel Trust (Vereinigte Stahlwerke) in 1926 was modeled on the U.S. Steel corporation in the U.S. The goal was to move beyond the limitations of the old cartel system by incorporating advances simultaneously inside a single corporation. The new company emphasized rationalization of management structures and modernization of the technology; it employed a multi-divisional structure and used return on investment as its measure of success. It represented the “Americanization” of the German steel industry because its internal structure, management methods, use of technology, and emphasis on mass production. The chief difference was that consumer capitalism as an industrial strategy did not seem plausible to German steel industrialists.

In iron and steel and other industries, German firms avoided cut-throat competition and instead relied on trade associations. Germany was a world leader because of its prevailing “corporatist mentality”, its strong bureaucratic tradition, and the encouragement of the government. These associations regulated competition and allowed small firms to function in the shadow of much larger companies.

With the need to rebuild the bombed-out infrastructure after the Second World War, Marshall Plan (1948–51) enabled West Germany to rebuild and modernize its mills. It produced 3 million of steel in 1947, 12 million in 1950, 34 million in 1960 and 46 million in 1970. East Germany produced about a 10th as much.

Italy

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 (Stassano furnace). Despite periods of innovation (1907–14), growth (1915–18), and consolidation (1918–22), early expectations were only partly realized. Steel output in the 1920s and 1930s averaged about 2.1 million metric tons. Per capita consumption was much lower than the average of Western Europe. 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. Italy modernized its industry in the 1950s and 1960s and it grew rapidly, becoming second only to West Germany in the 1970s. Strong labour unions kept employment levels high. Troubles multiplied after 1980, however, as foreign competition became stiffer. In 1980 the largest producer Nuova Italsider lost 746 billion lira in its inefficient operations. In the 1990s the Italian steel industry, then mostly state-owned, was largely privatised. Today the country is the world’s seventh-largest steel exporter.

United States

From 1875 to 1920 American steel production grew from 380,000 tons to 60 million tons annually, making the U.S. the world leader. The annual growth rates in steel 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 producers. This explosive American growth rested on solid technological foundations and the continuous rapid expansion of urban infrastructures, office buildings, factories, railroads, bridges and other sectors that increasingly demanded steel. The use of steel in automobiles and household appliances came in the 20th century.

Steel Bridge Mississippi

Eads Bridge. Oldest bridge in Mississippi. Opened in 1874

Some key elements in the growth of steel production included the easy availability of iron ore, and coal. 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 Iron 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 Buffalo for shipment by rail to the steel mills. Abundant coal was available in Pennsylvania and Ohio. Manpower was short. Few native 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. By then the central figure was Andrew Carnegie, who made Pittsburgh the center of the industry. He’d sold his operations to US Steel in 1901, which became the world’s largest steel corporation for decades.

In the 1880s, the transition from wrought iron puddling to mass-produced Bessemer steel greatly increased worker productivity. Highly skilled workers remained essential, but the average level of skill declined. Nevertheless, steelworkers earned much more than ironworkers despite their fewer skills. Workers in an integrated, synchronized mass production environment wielded greater strategic power, for the greater cost of mistakes bolstered workers’ status. The experience demonstrated that the new technology did not decrease worker bargaining leverage by creating an interchangeable, unskilled workforce.

Legacy

The President of the United States is authorized to declare each May “Steelmark Month” to recognize the contribution made by the steel industry to the United States

Japan

Yonekura 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).

The government’s activist Ministry of International Trade and Industry (MITI) played a major role in coordination. The transfer of technology from the West and the establishment of competitive firms involved far more than buying foreign hardware. MITI located steel mills and organized a domestic market; it sponsored Yawata Steel Company. Japanese engineers and entrepreneurs 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.

China

Communist party dictator Mao Zedong disdained the cities and put his faith in the Chinese peasantry for a Great Leap Forward. Mao saw steel production as the key to overnight economic modernization, promising that within 15 years China’s steel production would surpass that of Britain. In 1958, he decided that steel production would double within the year, using backyard steel furnaces run by inexperienced peasants. The plan was a fiasco, as the small amounts of steel produced were of very poor quality, and the diversion of resources out of agriculture produced a massive famine in 1959–61 that killed millions.

Today China is a dominant player in the worlds steel market.

Early steel production under Mao Zedong

Sources: BBC, Wikipedia, The Norwegian encyclopedia, Baltimore Sun