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Forging America: The History of Bethlehem Steel - Chapter 7

That same year, a small nuclear instrument and electronics company struggling to regroup after nearly going bankrupt began to redirect its core business away from electronics to steel joist manufacturing and ultimately toward steelmaking. Nuclear Corp. of America (Nucor) took on a new management team, moved its headquarters from Phoenix, Ariz., to Charlotte, N.C., and built its first bar mill.

Nucor executives decided to use electric furnaces pioneered by a few small companies a decade earlier and built its first electric furnace mini-mill in 1969 in Darlington, S.C. The furnaces were fed by inexpensive scrap, stripping away the costly overhead of ore mines, coke ovens and blast furnaces. Nucor combined its furnaces with a continuous casting method that allowed workers to shape steel directly from its molten form into billets, eliminating the need for large, expensive mills for rolling ingots into blooms and then billets. Then it combined those savings with a cheaper, largely nonunion work force.

Integrated steelmakers such as Bethlehem Steel and U.S. Steel had been using early versions of electric furnaces for decades, but only for high-grade products such as alloy and tool steel, and for low-tonnage specialty products, such as generators, rolls and propeller shafts. The integrated makers regarded electric furnaces as having too low a volume to be widely used.

But Nucor and a growing number of mini-mills challenged that belief, making electric furnaces the heart of the operation, setting off a new breed of steelmakers. And Nucor's new and aggressive president, E. Kenneth Iverson, offered workers a profit-sharing plan that persuaded them to shun unions.

In 1969, Nucor's total sales of $46 million weren't even a blip on the radar screen. But Bethlehem would come to regret ignoring Nucor's arrival into the steel market.

While mini-mills such as Nucor were advancing the latest innovations of electric furnaces, Bethlehem in 1968 was celebrating the opening of its first basic oxygen furnaces at the Bethlehem plant. It had built three basic oxygen furnaces at Lackawanna since 1964 and two more were built at Sparrows Point in 1966, but even then it was a technology that other companies had been using for more than a decade.

The advantage of the basic oxygen furnace was that it could process metal more quickly than open-hearth furnaces, was cheaper to operate, controlled more easily and could be fed by up to 30 percent scrap. It was a technology developed in Austria in 1952, and North American makers began building the furnaces in 1954.

Yet in 1957, when Bethlehem needed to increase capacity at Sparrows Point, it built an open-hearth shop with several new furnaces  the last big open hearths built in the United States. It was conclusive evidence that Schwab's gambler's mentality, which helped Bethlehem pioneer the Grey beam, had given way to Grace's methodical caution.

For Bethlehem, building new furnaces meant spending tens of millions of dollars. It wasn't easy for such a large company to buy into the latest wave. It would have required abandoning hundreds of millions of dollars Bethlehem had invested in technology that was now obsolete.

Rather than pour money into a new technology without a proven track record, Bethlehem followed 19th century steelmaker Andrew Carnegie's dictum that ''Pioneering don't pay.'' The company had adopted a habit of waiting until that technology was advanced and perfected before investing in it.

The story was much the same for continuous casting, a revolutionary method of pouring molten steel directly from the ladle into a billet, bloom or slab, instead of first making ingots. The process eliminated the need to use large expensive rolling mills to turn the ingots into slabs. Bethlehem helped develop the continuous casting method that has become the standard, but then was too cautious to invest in its own work.

In 1966, through its Homer Research Laboratory, Bethlehem Steel began testing a continuous casting machine at its Bethlehem plant in a partnership with Republic, Youngstown and Inland Steel companies. Steel and its partners proved that continuous casting worked, but they abandoned the pilot mill in 1968, believing that it could not be used for the high volumes they needed to produce.

Yet their foreign and domestic competitors refined the process and began using it. Bethlehem later reconsidered its belief that continuous casting could not mass-produce.

In 1969, while continuous casting was already being used in Japan and at domestic mini-mills, Bethlehem decided to build a casting machine of its own. Despite advisers suggesting it be built at one of the company's more progressive plants, such as Burns Harbor or Sparrows Point, Martin decided to put it in Johnstown. However, after spending millions of dollars to prepare the site and build the foundations for the casters, Johnstown's modernization abruptly ended, further delaying Bethlehem's foray into new, more efficient technology that other companies were using already.

The company would build casters at Burns Harbor in 1975 and 1986 and at Steelton in 1983, but continuous casting never came to the Bethlehem plant and never became the foundation of its steelmaking process.

Even when Bethlehem Steel officials tried to stay a step ahead of competitors, they often misfired. In the early 1970s, they conducted a study of worldwide iron ore supplies. The study determined that the steel industry was headed for an iron ore shortage.

Company forecasters knew that Bethlehem's Cornwall mines in Lebanon County would run out soon. They knew there were years of iron ore in the Grace Mine near Morgantown, Berks County, one of the most modern mining operations in the nation.

With a major shortage ahead, the company signed several long-term contracts to buy iron ore from mines in Mount Hope, N.J., Venezuela and Chile. The plan rested on the core belief that steel demand would continue to rise.

It didn't, and instead of an iron ore shortage, there was a glut. So Bethlehem closed the one mine it controlled completely: the Grace Mine. The company abandoned the mine despite its state-of-the-art diesel locomotives, plentiful supply of high-grade iron ore and the tens of millions of dollars it invested years earlier.


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