Bethlehem Steel

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~ the eulogy ~

The company started in 1857 as the Saucona Iron Company, put together by a Moravian merchant named Augustus Wolle to work the iron ore in the hills around Bethlehem, Pennsylvania. It made rails, then armor plate for the Navy. It stayed a capable second-tier producer until Charles M. Schwab took control and formed the Bethlehem Steel Corporation in 1904, after leaving the presidency of US Steel. Schwab's bet was a rolling mill licensed from an English engineer named Henry Grey, which could roll a structural beam with a wide flange in one piece rather than riveting plates together.

In January 1908 the first commercially successful wide-flange shapes in America came off that mill, and the American skyline followed. Bethlehem plate went into the Chrysler Building and into the towers of the Golden Gate Bridge. The shipyards did the same work for the Navy, and Bethlehem Shipbuilding delivered 1,121 vessels during the Second World War, more than any other builder in the country. Employment across the mills and yards ran to something near three hundred thousand people.

Output peaked at around twenty three million tons a year at the end of the 1950s, and that was the top of the curve. Foreign steel landed cheaper through the 1970s, and electric arc minimills melting scrap took the plain products from underneath. Bethlehem kept the integrated mills and the obligations that came with them. By the end of 1995 the home plant stopped making steel and the blast furnaces on the south side of the Lehigh River went cold.

~ the dossier ~

~ 1,121 ships ~

The shipbuilding number is the one worth sitting with. Over the war years Bethlehem's yards averaged better than one delivered hull a day, counting cargo ships alongside destroyers, on top of repair work on damaged vessels that arrived faster than anybody had planned for. Fore River in Quincy and Sparrows Point in Baltimore were the largest of the yards, and both ran around the clock for the duration.

~ what imports actually did ~

The standard story blames cheap foreign steel, and that is half right. Imports set the ceiling on price, but what killed the integrated producers was a domestic technology they declined to adopt. A minimill melts scrap in an electric furnace and rolls it into rebar or bar stock with a few hundred people. An integrated mill starts from iron ore and coke, runs a blast furnace that cannot be switched off economically, and needs thousands. Nucor and its imitators took the low end of the product mix during the 1970s and 1980s and Bethlehem let them have it, on the theory that the high-margin flat-rolled business was defensible. It was not, and by the 1990s the minimills were making that too.

Turkey ended up on the other side of that ledger. The state mills at Karabük and Ereğli came out of the 1930s and the 1960s, but the growth after them was private electric arc furnaces near the ports, melting imported scrap into rebar, which is exactly the product an integrated mill in Pennsylvania could not price against. By the time the last Bethlehem furnace went cold, Turkish rebar was turning up routinely in American trade filings and the country had become one of the largest buyers of steel scrap anywhere. Reading about Bethlehem from Ankara means reading about a competitor.

~ the pension book ~

Bethlehem filed for Chapter 11 on 15 October 2001 with more retirees than workers. The steelworker contracts of the postwar decades had promised pensions and lifetime health coverage on the assumption that the company would always be larger than its own history, and by 2001 it was carrying around 95,000 people in the pension plan against a payroll a fraction of that size. In December 2002 the Pension Benefit Guaranty Corporation took the plan over, the largest single liability the agency had assumed in its twenty eight years. Retiree health and life insurance were cut off in early 2003.

What was left sold for $1.5 billion. Wilbur Ross had already assembled International Steel Group out of the bones of LTV, and the Bethlehem purchase closed on 7 May 2003, bringing Sparrows Point and Burns Harbor with it. Those plants still make steel today under later owners. The corporation itself was dissolved in the same year, its liabilities left behind in the bankruptcy estate rather than carried across to the buyer.

~ steelstacks ~

The Bethlehem site is now a venue. The five blast furnaces still stand along the Lehigh, lit at night in blue, with an arts center and a casino built around their feet under the name SteelStacks. The town runs a music festival in their shadow every August. Preserving the machinery of a dead employer as a backdrop is an odd civic decision, and Bethlehem made it deliberately after a decade of arguing about demolition.

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