Slice open the growing U.S. economy at Maryland, slide it under a microscope, and you see this:
The University of Maryland Medical Center decides to build a nine-story, $90 million hospital tower in downtown Baltimore. A contractor hires Jarvis Steel & Lumber Co. in 1993 to make the building's metal skeleton.
Jarvis orders $500,000 of construction steel. Spurred by the hospital job and hundreds of other orders, Bethlehem Steel Corp.'s Sparrows Point mill runs its furnaces, casters and rollers at the highest rate since the late 1970s. Shareholders of the mill's parent company see something unfamiliar: profits.
Bethlehem Steel is making money again, and the main reason is a resurgent economy. Buildings are rising. Machinery is being forged. Auto factories are working overtime.
Last week the company reported that it made $12.9 million for the three months ended March 31, its third consecutive quarter of operating profits after a nearly four-year drought. Some Wall Street analysts think Bethlehem, the nation's second-largest steelmaker, could earn $200 million this year and $300 million next.
"Business couldn't be better," said Duane R. Dunham, president of the Sparrows Point operation, which sold roughly $1.5 billion worth of steel last year. "The order book is extremely strong. We're going full out right now."
But as ever in the steel trade, the question is: For how long?
Even critics credit Bethlehem and other big U.S. steelmakers with stunning improvements in plant investment, cost cutting and quality in the past decade. But the industry still faces intense competition from foreign producers and U.S. "minimills," which melt junk metal instead of making steel from scratch.
And the economy that gives today will eventually withhold its favors. No industry is more handcuffed to the business cycle than steelmaking.
Charles A. Bradford, a steel analyst with investment firm UBS Securities in New York, is blunt about Bethlehem's long-term prospects. For all the company's "spectacularly good" results now, he said, "the issue for them is survivability in the next recession."
Although less heralded, steelmaking's renaissance rivals that of the U.S. automakers. Ten years ago the industry was a rusty relic of what it was in the 1960s, run by a highly paid, overstaffed work force operating obsolete equipment.
But big steel rebuilt itself, spending billions of dollars on the best smelters, casters and rollers. The new equipment eliminated manufacturing steps and required less maintenance and fewer workers.
Twenty years ago, the average ton of American steel took 12 man-hours to produce. Now it's only a little more than four, reports the American Iron and Steel Institute, an industry trade group.
U.S. steelmaking today is "quite a modern industry -- in every sense," said William T. Hogan, director of the Industrial Economics Research Institute at Fordham University in New York. Sparrows Point, he adds, is "highly efficient."
But steel companies and their shareholders paid a heavy price for modernity.
Capital investment sapped profits. And a slow economy prevented the companies from using their shiny new equipment -- with huge, fixed costs whether it churned out steel or not -- to best effect.
Bethlehem matched the industry trend for trend.
Capital spending soared, hitting $1.5 billion over the past several years at Sparrows Point alone. Employment plunged companywide. The Baltimore County mill's work force shrank to 5,600 today from 22,000 in the 1970s.
And red ink flowed. Since 1989, the company has posted net losses of more than $2 billion. Its stock was mired for years. Trading in the high $20s in 1989, it fell as low as $10.50 a share in October 1992.
Waiting is over
But the day for which the industry prepared and hoped has finally arrived. Bethlehem and the other steel companies are running at more than 90 percent of production capacity -- as close to full as they get.
Many mills are turning away business, said Mr. Bradford, the UBS Securities analyst. And, though prices are still below levels of the 1980s, steelmakers have been able to charge 4 percent or 5 percent more for their products recently.
"We've got a lot of customers telling us they're expecting very strong demand for '94, '95 and '96," Bethlehem Chairman and Chief Executive Curtis H. Barnette said in an interview last week. "Business is very good."
The car recovery is one big boost. Detroit bought 22 percent more steel last year than it did two years previously. Bethlehem's plant in Burns Harbor, Ind., which makes auto steel, is a big
And light construction is roaring. Businesses across the country are splurging on low-rise office buildings, warehouses and factories with steel sides and roofs.
The metal-building business is up 25 percent from two years ago, reports Houston-based Metal Building Components Inc. (MBCI), a big Sparrows Point customer. Demand is so high that MBCI is adding three factories to the 14 it already has.