Just 15 years ago, the steel industry in the Chicago area served as a stark, enduring symbol of a punishing economic recession and America’s falling stock as a global competitor.
Wisconsin Steel shuttered. U.S. Steel and Inland Steel, two of the nation’s historic giants, struggling through massive retrenchments. Tens of thousands of well-paying jobs lost in the Chicago area alone.
On Tuesday there emerged perhaps the most tangible sign that times have changed in the U.S. steel industry: Ispat International NV, a global steelmaker based in the Netherlands, announced that it had looked at Inland Steel Industries Inc. and decided it was vibrant enough to spend $1.43 billion to buy it.
The acquisition of Inland, one of the nation’s largest integrated steel producers, spotlights the remarkable but quiet comeback in the industry.
“The American steel industry has started improving after the last downturn in the 1980s,” said Lakshmi N. Mittal, chairman and chief executive of Ispat. “They have made tremendous progress in downsizing and improving their productivity and quality.”
That comeback really isn’t a steel story. It’s the story of U.S. manufacturing, which recognized it needed to change fundamentally the way it made products. Along with its brethren in dozens of industries, steelmakers embraced technology, slashed payrolls and cut layers of management. And the steel industry just had its best year in a quarter-century.
The trouble is, nobody outside the steel industry seems to have noticed. The Midwest still is considered the Rust Belt, and the steel mills humming along on the southern shore of Lake Michigan do so largely unnoticed.
How can that be?
“Steel companies are producing a better product at a better cost,” said Michael Locker, president of Locker Associates, a New York consulting firm that specializes in steel.
“But the vast majority of the benefit went to the end user–the light-weight automobile we enjoy today is a result of steel. Of course, the end users didn’t say much about that.”
But there’s more to the issue than that. The average Joe doesn’t buy hot-rolled steel or I-beams, so issues of quality and productivity are irrelevant. The average Joe sees jobs–or lack of them.
“Throughout the early part of the 1980s and the mid-80s, you had a tremendous number of plant closings,” said Andrew Sharkey, president of the American Iron and Steel Institute. “Back then you had between 500,000 and 600,000 employees. Today you’re probably looking at 150,000 to 175,000.”
The impact of that downsizing has been phenomenal in this region. Inland now employs about 9,500 people at its huge steel plant in East Chicago, down from 26,000 in 1979.
U.S. Steel Group’s Gary Works employs 8,000, down from more than 20,000 in the mid-1970s.
Other plants disappeared–U.S. Steel’s South Works and Wisconsin Steel on the city’s South Side.
Sharkey said 1982 probably was the industry’s low point. That year, U.S. steelmakers shipped about 74.6 million tons. In 1997, that figure was 105 million tons.
Back in “those dark days of the early and mid-80s” it took 10 people an hour to produce a ton of steel, Sharkey said. Foreign competitors could make that same ton of steel in an average of slightly more than seven man-hours.
Today the U.S. industry average is three man-hours, he said.
“In some mills it’s 0.5 hours,” Sharkey said. “It’s just staggering. If you walk through a mill today, you literally would not recognize it because it’s so automated and high-technology. The entire production process is computer-controlled. There’s extensive use of lasers. It’s really remarkable.”
In other words, smaller payrolls haven’t meant smaller production. Gary Works, for example, has been setting production records in recent years.
Production also has been boosted by mini-mills, led by pioneer Nucor Corp. Mini-mills, which use mostly scrap metal and are powered by electricity rather than blast furnaces, produce most of the commodity steel products in the U.S., Locker said.
Altogether, steel companies have been investing more than $1 billion a year on expanding old plants and building new ones.
All of that is small consolation for the hundreds of thousands of folks who lost their jobs in the upheavals of the 1980s and never were called back. As the industry began expanding later, the laid-off work force was bypassed in favor of people with technical skills. And when the huge integrated mills such as U.S. Steel, Bethlehem Steel Corp. and Inland Steel began hiring again, they also needed workers with up-to-date skills.
But demand is now rising for American steel products, and that increase suggests a broader success story: U.S. manufacturers overall had become the high-quality, low-cost producers in their respective world markets.
But this isn’t the end of the story. In discussing Ispat’s takeover of Inland, Mittal said that while the American industry now stacks up well against any other nation’s, “more can be done. More can be done.”
