shadow of steel's lost empire

I wrote this article after Bethlehem Steel Corp. filed for Chapter 11 protection in U.S. Bankruptcy Court, Southern District of New York. –MR

Baltimore Sun
October 19, 2001
© 2001 Baltimore Sun, © 2006 Mark Reutter

If you want to know something about the troubles of the steel industry, whose latest casualty is Bethlehem Steel Corp., head down the spine of Patapsco Neck past Dundalk to the outer fringes of Baltimore Harbor.

There you’ll find a land of fantastic shapes and sizes – deltoid furnaces, long-armed cranes and broad-beamed buildings, some spilling out masses of railroad tracks, other eerily quiet and empty-handed, industrial hulks in search of work.

Sparrows Point is a brooding symbol of the changing fortunes of the steel business and of blue-collar Baltimore. In its prime in the 1950s, this flagship plant of Bethlehem Steel was the largest steelworks in the world, with furnaces, ovens and rolling mills that consumed 1/500th of the nation’s total output of electricity, burned 6 million tons of coal a year, and poured 22,000 tons of hot metal a day, an average of 15 tons a minute.

Sparrows Point was the hub of a steel-spoked manufacturing wheel that clacked out $2.8 billion worth of goods in 1957. Out of the blaze and hiss of its furnaces came the metal for Chevy tail fins, tinplate for National Beer cans, bridge sections for the Bay Bridge, and sheathing for refrigerators, toasters and a thousand other products that were part of America’s post-war culture of abundance.

In those days, the plant had its own tang. Clouds of sulfuric acid rose from the pickling vats, catching the uninitiated by the throat. By day a shroud of gritty orange smothered the peninsula; at night the heat and flames projected a quavering glow across the horizon that was visible for miles around.

Inside the mills, men chewed Brown’s Mule Plug tobacco to keep the dust out of their throats, and they nailed rubber slabs from old tires to their shoes to keep their feet from getting burned on the brick floors.

The power of steel in steel country couldn’t be divorced from the insular culture it created. Ed Gorman, whose grandfather arrived at the mills in 1896 from Ireland, never considered working anywhere else after he graduated from high school. Going to work for Bethlehem Steel, he said proudly, “was going into the middle class.”

That was 40 years ago when 30,000 people worked at the Point. Today there are 4,000 left.

Sparrows Point was started by a group of Philadelphia businessmen seeking to exploit the discovery of iron ore near Santiago, Cuba. When opened in 1890, the steel mill was blessed by Cardinal Gibbons of Baltimore and christened “the Goddess of Industry” by the Maryland press.

A well-furnished company town was constructed. It had a company store, public schools, half a dozen churches and 500 houses built for different grades of employees going from A Street (management) to K Street (laborers).

Sparrows Point was purchased in 1916 by Charlie Schwab, the owner of Bethlehem Steel. A man of towering ambition, Schwab vowed to build Sparrows Point until it was the biggest metalmaking center in the country. He might have succeeded had the Great Depression not intervened.

Bethlehem was plunged into financial distress in the 1930s, which was made worse by Schwab’s years of overexpansion. Sparrow Point did not recover until World War II. By then, Schwab was dead.

The war years were perhaps the Point’s finest hour, a triumph of conventional steelmaking by a skilled and dedicated workforce. The pipe mill rolled gun barrels for the Army. Other mills produced the steel for grenades, bombs, barbed wire, landing craft, cargo ships and airplanes.

The postwar period was even more prosperous. Standing astride the great steel-consuming markets of the Northeast and blessed with low-cost ore from new mines in Venezuela, Sparrows Point gushed metal. Vast fortunes were made at company headquarters at Bethlehem, Pa. In 1956, Schwab’s successor, Eugene Grace, was the best-paid CEO in America, and 11 of 18 of the nation’s highest-paid executives worked for Beth Steel.

But the same executives who paid themselves such princely sums didn’t see fit to pay for a decent research laboratory or invest in new technology that was being developed in Europe and Japan. Instead they divvied up orders with the other U.S. steelmakers and raised prices. “Our salesmen don’t sell steel; they allocate it,” a company official gloated.

In the 1960s, a lackluster demand flashed a warning sign that the domestic steel industry was in trouble. Bethlehem needed either to strike out in new directions with improved products or lower prices on its standard items. It did neither.

The price increases encouraged substitution of other materials for steel. The Point’s turf was first invaded not by “cheap steel imports” (as so often believed), but by a domestic rival. Reynolds Metal of Richmond, Va., innovated a low-cost aluminum can that stripped Sparrows Point of its beer and soft drink markets. 

The Japanese steelmakers weren’t far behind. The dynamic that drove steel imports wasn’t difficult to comprehend. Wire rod shipped from Yawata, Japan, to New York was of comparable quality to the wire rod from Sparrows Point – and about 15 percent cheaper.

When imports rose to record levels, Bethlehem and other domestic makers responded by raising prices some more and lobbying Washington for import restrictions. Aluminum and plastic took a bigger larger chunk of the consumer goods markets.

The company was unprepared when the 1982 recession struck. Panicked by $1.47 billion in losses, top executives wiped out whole divisions without crafting a coherent strategy for renewal.

Working-class communities in Dundalk and East Baltimore went into shock as the pipe mill, the rod and wire mill, a coke oven battery, and many of the open hearth and sintering units were shut down. Thousands of workers were laid off, never to return.

Sparrows Point enjoyed a rebound in 1994-96 as a result of heavy demand and the introduction of better technology. But the recovery proved short-lived. In retrospect, installing new equipment delayed but did not fix the plant’s (and industry’s) fundamental problem – the lack of new markets for steel.

That problem in turn caused depressed prices and sharp financial losses for Bethlehem, whose Chapter 11 filing this week leaves Sparrows Point in a precarious state.

While the modern “L” blast furnace and overhauled strip mills still produce steel efficiently, Sparrows Point is mostly a landscape of empty buildings and weed-filled lots. Little remains of the company town where generations of families purchased groceries at the company store, paid rent to the company collector and were straightened out by the company police if they stepped out of line.

Amid the rust and decay, though, it is important to remember the role that this peninsula played in the history of Baltimore and to honor what was once here – the thousands of strong men who came to the Point over the decades, sweating, shouting and smelting mountains of foreign ore into rivers of American steel

© 2006 Mark Reutter