Iron & Steel

Iron and Steel in the Lehigh Valley

By John K. Smith

The fortunate combination of natural resources, transportation networks, and entrepreneurial talent combined made the Lehigh Valley the center of the nation's iron industry in the middle decades of the nineteenth century. In the latter decades of the century, although the center of rapidly expanding steel industry moved west to Pittsburgh, the Bethlehem Iron Company survived and even prospered by shifting from the industry's key product–railroad rails–to battleship armor and large guns. This strategic shift paid enormous dividends in World War I in the form of massive profits the company earned supplying munitions to the Allies. By Armistice Day in 1918, Bethlehem was the second largest American steel company. In the 1920s Bethlehem became a diversified steel producer–both geographically and in its product lines–through the acquisition of several large competitors and the development of the novel Bethlehem beam for building construction. In the twentieth century, as the scale of steel production increased Bethlehem could not longer rely on local sources of raw materials, especially iron ore which it obtained from mines in Cuba and Chile. Buying materials in shipload quantities from far flung locations, obviously favored steel mills located on deepwater ports. Although Bethlehem had such plants near Baltimore and Buffalo, the company continued to invest in its home plant located sixty miles north of the nearest port, in Philadelphia. Although the Bethlehem plant was located near important markets, especially for structural steel, the economic disadvantages of its location for basic steel production made the plant increasingly uncompetitive. In the mid-1970s technological and market changes in the steel industry took a heavy toll on Bethlehem Steel generally, and especially on the home plant. After 270 years of continuous iron-making in the Lehigh Valley, the Bethlehem blast furnaces were blown out for the last time in 1995.

In the eighteenth century, Pennsylvania became the center of colonial American industry. Within the colony, Berks County, which encompassed the Schuylkill River valley, had the largest number of iron-making and ironworking establishments. The Lehigh Valley had only one facility, the Durham Furnace near the Delaware River, which started production in 1725. Later it would be operated by George Taylor, who would be a signer of the Declaration of Independence. Iron from this furnace was floated forty miles downstream to Philadelphia in unique Durham boats.

In this era iron was made in stone blast furnaces, about twenty-five feet high, in which a mixture of iron ore, charcoal, and limestone was burned. A blast of air generated by water-powered bellows kept the fire burning and the temperature in the furnace high enough to melt the product iron. In the furnace the combustion of the charcoal generated carbon monoxide that reacted with the iron oxide ore to make metallic iron. The limestone absorbed impurities from the iron to create slag which could be skimmed off the molten iron. Iron from a blast iron was called pig or cast iron. The term pig iron probably came from the way in which the molten iron from the blast furnace was allowed to run through channels dug in the sand cast floor to form approximately ninety pound "pigs" of iron. Apparently, someone once thought that this scene resembled young pigs suckling a sow–and the name stuck. Cast iron refers to the properties of blast furnace iron; it melts at a relatively low temperature. This type of iron was useful for making items such as pots and stoves, but because it was brittle it could not be used for tools or weapons. Cast iron could be converted to aptly named "wrought" iron by repeated heating and hammering. Wrought iron was much tougher than cast iron, but was too soft to make good knife or sword blades. These uses required steel, which has a combination of toughness and hardness. It was made in very small quantities by heating wrought iron bars buried in charcoal. Chemists and metallurgists would later explain the differences between these types of iron. Cast iron contains about 4% carbon, absorbed in the blast furnace, and wrought iron has very little carbon in it. Steel refers to a wide variety of materials containing between 0.1 and 1% carbon, although it the complex crystal structures of steels that are responsible for their properties. One important limitation of colonial technology was that furnace temperatures could not be raised high enough to melt wrought iron or steel, so both had to be made from small solid bars.

Iron was not only difficult to work, it was also expensive to make. Because of limited transportation on rough roads and shallow rivers, iron could only be made where iron ore, limestone, extensive forests for charcoal, and fast-flowing streams to provide water-power were located. So-called iron plantations soon became known for their destruction of forests. A typical 18^th century blast furnace that produced about 600 tons of iron per year would clear 300 acres of trees annually. Wood was converted to charcoal by a controlled burning process that had to be tended around the clock. Charcoal had to be supplied to the blast furnace continuously because once lit, it was in blast for many months at a time. The scale of blast furnaces, and iron production, was limited by the amount of nearby timber that could be converted to charcoal.

The dramatic growth of the Lehigh Valley iron industry would not be fueled by charcoal but by anthracite coal, which would be found in large deposits in the mountains forty to eighty miles to the north. Explorers in these mountains had found outcroppings of a very hard coal that they sometimes referred to as stone coal. Small amounts of it had been used locally by blacksmiths. The industrial development of the anthracite fields had its origins in the War of 1812, when the British naval blockade of the American coastline prevented the shipment of coal from Britain or Virginia to Philadelphia. A Philadelphia Quaker entrepreneur, Josiah White, had experimented with anthracite at his nail making works. White, along with others, soon discovered that even though anthracite was difficult to ignite, it burned with a hot, clean flame–ideal for home heating and many other industrial processes. White realized that there would be a large market for anthracite if it could be economically transported from the coal deposits one hundred miles to the north. What made this project feasible was that Philadelphia lay at the confluence of the Delaware and Schuylkill Rivers both of which originated in the coal region. Unfortunately, both the Schuykill and the Delaware tributary, the Lehigh, were too shallow and rocky for navigation. To make either river a major thoroughfare an expensive set of dams, canals, and locks would need to be constructed. White became involved in a corporation established to build such a canal on the Schuykill but lost control of the project to other investors. Undaunted he decided to launch a similar enterprise on the Lehigh. His canal began operation in 1829, four years after the Schuylkill canal opened, and soon over one hundred thousand tons of anthracite annually made its way down the Lehigh and Delaware Rivers. (The Delaware canal opened in 1834).

Not content to operate coal mines and a canal, White began to contemplate the use of anthracite to smelt iron. As early as the 1820s some ironmasters had experimented with anthracite but no one had been successful. In Wales, however, ironmaster George Crane had discovered that if the blast air was preheated, he could make iron with anthracite. In 1837, White's nephew visited Crane's iron works, on other business, and learned of the new process. White and his partner Erksine Hazard convinced Crane's associate, David Thomas, to come to the Lehigh Valley and construct a hot blast anthracite furnace. He arrived in the spring of 1839 and the furnace started up successfully the following summer. Soon other Lehigh Valley entrepreneurs were building their own furnaces. By 1850, Thomas's competitors had built ten other furnaces.

The Lehigh Valley iron industry boomed in the following decades and by the early 1870s it was the center of the American industry. In 1873 Pennsylvania was the number one iron producing state with nearly half of the national output; and the Lehigh Valley was the number one region in Pennsylvania. In that year, the Lehigh Valley had 47 blast furnaces that yielded nearly 400,000 tons of iron.

The year 1873 turned out to be an auspicious one because the Bethlehem Iron Company began to make a new product, Bessemer steel, which was fast becoming the preferred material for railroad rails, the single largest use for iron. In 1863 the Bethlehem company began to supply rails for Asa Packer's Lehigh Valley Railroad. Packer who had started business in the coal region building canal boats and operating coal mines, in the early1850s built a railroad from the coal depot of Mauch Chunk on the Lehigh River to Bethlehem forty miles to the south. Although Packer operated the iron works, the largest stockholder was actually the Philadelphia Quaker industrialist Joseph Wharton, who had become involved in zinc production in Bethlehem in the 1850s. Wharton would later play a critical role in saving Bethlehem from the general decline of the Lehigh Valley iron industry. Packer and his right-hand man, Robert Sayre helped to secure the future of their firm at its very beginning when they hired John Fritz, who was widely acknowledged as America's foremost ironmaster. It was Fritz who enabled Bethlehem to move into Bessemer steel production.

The English inventor, Henry Bessemer had discovered that he could make large batches of steel by blowing air into a converter containing molten iron from a blast furnace. The oxygen in air removed the carbon from iron through combustion, which generated enough heat to keep the nearly pure iron molten. Bessemer's process made quantity production of cheap steel possible. Although Bessemer steel was relatively brittle, it still made rails that lasted longer and could carry heavier loads than iron ones. The American Bessemer steel industry fed the growing need for rails for the railroad network which expanded from 53,000 miles in 1870, to 93,000 miles in 1880, and to an astounding 167,000 miles in 1890.

In the same year that Fritz installed a Bessemer converter in Bethlehem, Andrew Carnegie also built one in Pittsburgh. Thus, began Carnegie's relentless effort to reduce the cost of his rails and drive his competitors out of business. One major advantage that Carnegie had was that Pittsburgh was close to large deposits of bituminous coal. After being heated to drive off impurities, bituminous coal was converted to coke, which was ideal for iron production. Because of its structure, coke could be used in much larger blast furnaces, which dramatically lowered the cost of iron. By 1875 bituminous coal made as much iron as anthracite. By 1890, it made three times as much. As the center of the iron and steel industry moved to Pittsburgh, the older anthracite iron industry of the Lehigh Valley went into a long slow decline. Only the Bethlehem Iron Company truly prospered.

In the 1870s Bethlehem had remained competitive by installing Bessemer converters to make steel for railroad rails. In 1885, the company had 12% of the national rail market. By this time however, the company management had decided to make a major investment in new products–armor plate and big guns–for the new American navy. The Europeans had already begun to build large steel ships and the American government felt the need to do likewise. These ships could not be made from brittle Bessemer steel, but were constructed from more robust Open Hearth steel, made by slowly cooking iron in large furnaces. To move into this new field, Bethlehem had to install Open Hearth furnaces and acquire the ability to mold, forge, and machine ingots of steel weighing up to one hundred tons. After the death of Asa Packer in 1879, Joseph Wharton took a more active role in the direction of the company, and with John Fritz convinced the company's directors to undertake these expensive and risky new investments.

After being awarded government contracts in 1886, Bethlehem committed itself to becoming an armaments manufacturer and soon joined the ranks of the established European firms–Krupps in Germany, Schneider in France, and Vickers and Armstrong in Great Britain. Orders from the United States and other countries kept Bethlehem busy even during the economic depression of the mid-1890s. Because Bethlehem's only competition came from Carnegie, who was willing to cooperate when the customer was the U.S. government, the company became a small but very profitable one. Significantly, during this period, Bethlehem stopped making rails.

Although steel production in the Lehigh Valley would continue into the twentieth century, the local interests yielded control of the company in 1901 to Charles M. Schwab, an aggressive steel executive who at that time was president of the new United States Steel Corporation. Bethlehem had not been included in the mergers that led to two-thirds of the American steel industry being consolidated into U. S. Steel because its inclusion would have eliminated whatever competition existed for the government's military contracts. That is probably the reason why Schwab bought the company for himself, not for his employer. The immediate cause for this peculiar move seems to have been an offer tendered for Bethlehem by the British firm Vickers. Apparently, U.S. Steel did not want to compete with Vickers in the U.S. market. Over the next several years, Schwab left U.S. Steel and became involved in the U.S. Shipbuilding Company, which was put together by merging a number of existing firms. Schwab made Bethlehem part of U.S. Shipbuilding, but when the new company encountered financial difficulties, he refused to use Bethlehem's considerable assets to bail out the parent company, which subsequently collapsed. After much controversy and litigation, Schwab ended up in control Bethlehem and most of the shipyards.

Beginning in 1905, Schwab sought to make the new Bethlehem Steel Corporation into a large diversified manufacturer, a strategy that led to a dramatic expansion of the plant. Soon Bethlehem moved back into the rail business, this time with new Open Hearth rails that were rapidly replacing Bessemer ones. Schwab's most important venture was to invest in a mill to roll a new kind of steel beam developed by inventor Henry Grey. What would become known as the Bethlehem beam became an important product for the company, which maintained a monopoly on it until 1929. By diversifying the company's product line, Schwab increased Bethlehem's steel making capacity four fold within a decade. To finance this expansion Schwab re-invested profits–instead of paying dividends to stockholders–and borrowed substantial sums of money. For several years, interest on this debt absorbed most of the company's earnings. Schwab's aggressive investment plans left the company financially vulnerable during economic downturns, one of which was occurring in 1914 when world events created a tremendous opportunity for Bethlehem.

After the outbreak of World War I in August 1914, concerns about debt and recession faded as large orders for guns and shells from the Allies poured in. Bethlehem's wartime production was probably essential for the eventual victory of the Allies, who had to take munitions at whatever prices Bethlehem charged. The company profited handsomely from the war, its assets increasing from $85 to $400 million. By the end of the war Bethlehem was the third largest industrial corporation in America behind U.S Steel and Standard Oil of New Jersey.

In the 1920s the steel industry benefited from the overall economic prosperity the country enjoyed. Bethlehem had used some of its cash to buy several competitors raising the company's steel making capacity to half that of U.S.Steel. The Bethlehem plant was kept busy supplying structural steel for urban skyscraper construction, especially in nearby New York City. The burgeoning automobile industry was consuming increasing amounts of steel, but most of it was supplied by Midwestern plants. As more and more people and goods moved by road rather than by rail, the railroads, historically the steel industry's best customer, began to decline.

The implication of this trend for the steel industry was lost among the general collapse during the Great Depression of the 1930s. From 1931 through 1935, the company operated at below 40% of capacity, hitting a low of 17% in 1932. During that same period employment dropped only by 20%, but workers hours and wages plummeted.

By keeping its skilled workforce intact during the lean years of the 1930s, Bethlehem was able to rapidly expand production after war once again broke out in Europe in 1939. The war years restored the company's prosperity, but government regulation and taxes kept profitability far below World War I levels.

After the war, the Bethlehem plant continued to prosper, although the number of employees gradually declined from its wartime peak. The remarkable growth of the American economy in the 1950s spurred the demand for steel for larger and more powerful cars, highways and bridges–especially for the new interstate system–, and suburban shopping centers. The halcyon days of the 1950s, however, ended abruptly with a sharp recession in 1958 followed by a long strike the next year.

The strike created an opportunity for foreign steel makers, who had finally recovered from wartime destruction, to make inroads into the American market. Even though the American steel industry was already experiencing relatively slow growth and declining profits, a number of important new technologies were developed in the post war era. Mini-mills, which re-melted scrap steel in electric furnaces, requiring much less investment and labor than traditional integrated mills, began to increase their share of the market. The basic oxygen furnace for making steel and continuous casting improved the efficiency of integrated mills. The Bethlehem plant installed a BOF in 1968, indicating that management was still willing to invest in the home plant. The year 1968 was also notable because that was the year that foreign steel imports surpassed Bethlehem's output. In the early 1970s the weakness of the American economy and the general decline in the world demand for steel led to the beginning of a wholesale restructuring of the world steel industry. The old Bethlehem plant, running for several miles, along a narrow strip of land along the Lehigh River, could not be adapted to allow it to compete in the new global steel industry. In 1995, iron and steel production became part of Lehigh Valley history, living only in the memories of the thousands of employees who had spent much of their lives working for "The Steel."

Bibliography

On the charcoal era see

Paul F. Paskoff. Industrial evolution : organization, structure, and growth of the Pennsylvania iron industry, 1750-1860. Baltimore: Johns Hopkins University, Press, 1983.

On the anthracite era see

Craig Bartholomew and Lance Metz, The Anthracite Iron Industry of the Lehigh Valley. Easton, PA: Center for Canal History and Technology, 1988.

On Bethlehem Steel see

David Venditta, ed. Forging America: The Story of Bethlehem Steel. Bethlehem, PA.: The Morning Call, 2003.