For Midwestern steelmakers, the 1980s were the dark ages, a time of mass layoffs, unrelenting plant shutdowns and bankrupting losses. Once the smoke cleared, it seemed, all that would remain would be the desolate hulks of America’s industrial past: a Rust Belt.
Today, like a defeated army, the tens of thousands of jobless steelworkers have largely faded away, and the industry’s lineup has been decimated by dozens of plant closings. Even the abandoned mills have been cut up and scavenged for scrap.
Something else has changed, though, since those grim days. The American heartland is agleam again with the glow of molten metal.
The renaissance is here.
Drawn by the region’s proximity to customers, raw materials and transportation and an expertise forged by generations of steelmaking, investors have poured more than $4.6 billion into the Midwest on new plants or to expand old ones in just the last few years. And projects worth at least $750 million are in the works.
The building boom–plus the hundreds of millions of dollars the industry spends annually on upkeep and upgrading existing facilities–have turned Midwestern steel producers from global also-rans into some of the most efficient and biggest in the world.
The modernization, by enabling mills to make high-quality steel profitably at low prices, also has helped revitalize basic manufacturing across the Midwest, from written-off tracts in grimy mill towns to farm communities that had been passed over by heavy industry before.
And it has caused something that few thought would ever happen again: The rebirth of Midwestern steel, though predicated on automated equipment, has opened the door to high-paying factory jobs to a new generation of young men and women.
Three years ago, Bryan Siders was a self-employed logger in northeastern Indiana. Now, he tends a 720-foot-long furnace at Steel Dynamics Inc.’s mill near Butler, where hourly workers earned an average of $57,000 last year, plus benefits that include stock options for every employee.
“I’ve got a family started now; we’ve got a baby on the way,” the 27-year-old says, as slabs of red-hot steel roll by. “Now, I can provide for everyone.”
Given the vast scale of the American economy, the direct gains in employment from these investments are admittedly small, numbering in the thousands. Because many of the new jobs are at non-union shops, the expansions haven’t swelled enrollment in the United Steelworkers of America.
Still, any hiring at all represents a sea change from decades of downsizing as the industry fell under the assault of low-priced foreign competitors.
And the indirect gains can be substantial, particularly in faded small towns like Butler (population 2,500), about 35 miles from Ft. Wayne in Indiana’s northeast corner.
Like pilot fish, three steel-processing plants have set up next to Steel Dynamics’ mill in what had been farmland only a couple of years ago; together, they employ 210 people and have plans to add 70 more. Up the road, Pullman Industries Co. is hiring 75 to make pickup-truck beds from the plant’s steel.
The local hardware store, Towne Hardware Inc., has taken on more help to deliver tools to the mill three times a day, while Butler has added another police officer and a full-time crew of paramedics. The city also has bought 160 acres for a new high school.
“A lot happens around a steel mill when it comes in,” says Tom Barnett, chief operating officer of Paragon Steel Trading Inc. of Ft. Wayne, which shares space in one of the new Steel Dynamics-related processing facilities, owned by Feralloy Corp. of Chicago.
Of course, no job is secure in America in the 1990s, when employers coldly slash payrolls even in good times to keep down costs.
Though the widening shutdown of General Motors Corp.’s North American operations could eventually depress orders, demand for steel has been outstripping the industry’s capacity to make and roll it, suggesting that the economy can support all the new mills and steelmaking jobs–and more.
But while the more pressing concern today seems to be finding enough workers, even at union-scale wages of $20 an hour and more, steel executives and analysts fret that sooner or later the industry’s automotive and construction customers will falter. Some also worry that money-hungry steel producers in Asia will swamp the United States with tonnage they can no longer unload at home, at blowout sale prices.
The Midwest, moreover, is not the only region that is growing as a steelmaker. Nucor Corp., for instance, has built six so-called mini-mills across the South and announced plans in early June to spend $300 million to build yet another, in its home state, North Carolina.
If demand buckles or a surge in imports is marked and prolonged, the American steel industry could be in for another round of firings, plant closings and business failures.
But if any region can withstand another siege, steel executives and analysts say, it is the Midwest, thanks to its fleet of new, highly productive facilities, the extensive refurbishing of monstrous old mills like U.S. Steel Group’s 87-year-old Gary Works and more productive use of employees.
“The question is, are you in a position to make hot metals cheaper than your competitors?” says Keith Busse, Steel Dynamics chairman and chief executive. While he cannot speak for every Midwestern steelmaker, he answers that in general, yes, they are the low-cost producers today.
“Fifteen, 20 years ago, everybody thought everything was heading south, to Mexico and the South, and some did. But like it or not, this is still where the preponderance of the market is. The resilience of the Midwest,” Busse adds, “is something.”
The region owes its revival in good part to old-line steelmakers, which have been investing steadily in new machinery for their existing Great Lakes mills or in new joint ventures with price tags of $100 million or so.
A few are much bigger. AK Steel Corp. is completing a $1.1 billion rolling mill in Rockport, Ind., that will employ 400 workers and finish 1.8 million tons of steel a year, primarily for vehicle makers. And a consortium has just opened a $350 million cokemaking facility at Inland Steel Industries Inc.’s East Chicago mill.
Mini-mills–upstarts that have revolutionized the industry by producing steel from scrap melted in electric furnaces–have been dropping big sums, too.
By itself, Steel Dynamics has spent $585 million on its 570-employee mill in Butler, which can now make and process 2.2 million tons of steel sheet a year, and the company is negotiating with electric utilities and local authorities in Toledo and northeast Indiana as it searches for a site for a $250 million structural-beam mill that would employ 300 people.
Perhaps the most important testimonial to the region’s star power, though, comes from the growing number of foreign companies moving to the Midwest to get in on the action.
Ipsco Inc. of Canada and Australia’s Broken Hill Proprietary Co. have invested in sizable mills in the Midwest. They will be joined soon by Royal Hoogovens NV of the Netherlands, which is building a processing facility in Jeffersonville, Ind., in a venture with Weirton Steel Corp.
And in the biggest deal of them all, London-based Ispat International NV aims to wrap up by the end of June its $1.43 billion acquisition of Inland Steel’s lakefront mill, which it has said will be the flagship of its North American operations.
“The Midwest steel industry has gone through a restructuring that allows them to compete internationally, not just with other steelmakers but with makers of other materials–glass, plastic, aluminum,” says Morton Marcus, an economics professor at Indiana University in Bloomington.
Much of the new money in steel is getting plunked down along the truck-clogged Main Street of the heartland–Interstate Highway 80–in historic steelmaking centers such as Cleveland and Burns Harbor, Ind., and greenfield sites in places like Delta, Ohio, and Montpelier, Iowa.
Reflecting the gradual migration of the auto industry, steel facilities are also popping up along the southern fringe of the Midwest, largely to feed foreign-owned auto-assembly plants and their parts suppliers.
No state is landing more investment than Indiana. Second to Pennsylvania in steel production 20 years ago, Indiana now makes more steel than the next two steel-producing states combined–Ohio and Illinois. In fact, with output last year of 25.2 million tons, Indiana officials boast that the state would rank sixth globally if it were a nation.
Steelmakers say they are flocking to the Midwest because of its easy access to raw materials: iron ore, coal and limestone for integrated mills which make steel from scratch, and scrap metal for mini-mills. Important for an industry that moves tons of goods every day, the region also is crosshatched with highways, rail lines and navigable waterways.
Eager to regain manufacturing jobs, state and local governments chipped in as well by passing out property tax breaks and job-training credits.
But the region’s chief selling point is that it is where most of the industry’s customers are. No matter what type of steel they make–sheet and strip for automobiles and appliances, plate for heavy equipment, beams and reinforcing bars for construction–steel executives say most of their buyers are within a day’s drive of their Midwestern mills.
“The industry is a much more market-driven industry,” says Michelle Galanter Applebaum, an industry analyst with Salomon Smith Barney in Chicago. Originally, the industry was centered in Pennsylvania because that was where the raw materials were. “Now, the industry is coming to where the market is.”
National Steel Corp. even packed up its Pittsburgh headquarters and, following its customers, moved to Mishawaka, Ind., in 1992. Sinking its roots deeper, the company said Thursday it will spend at least $150 million to build an automotive-steel processing plant outside Detroit, after spending $140 million to add on to its mills in Portage, Ind., and Granite City, Ill.
The industry’s Midwestern settlements are changing lives, often fundamentally.
Tony Christian hired on at Steel Dynamics in 1995, when the mill was just starting up. The 27-year-old had studied for jobs in real estate, computers and welding before he decided to give steelmaking a stab, drawn by the company’s generous pay and benefits and seemingly bright future.
Now, he is tucking money away regularly so his 4-year-old son can go to college and hopes to stay on until he can retire–a dream that millions of factory hands have shared before him.
