There is hope yet for American steel manufacturing

Plants like Sparrows Point will never return, but new, high-tech plants are flourishing

August 18, 2013|Robert L. Ehrlich Jr

The huge, idle steelworks is impossible to miss as one travels across the Key Bridge. More than once, my boys have asked about the giant plant at Sparrows Point. "What was made there?" "How many people worked there?" "How come nobody works there anymore?"

The answer is complex; the full explanation as to why hundreds of acres of prime industrial land are now shuttered goes far beyond one plant located in Sparrows Point, Maryland.

I thought about this Ehrlich family discussion while watching the uproar generated by the New York Metropolitan Transportation Authority's decision to allow a subcontract for the steel decks of the Verrazano Narrows Bridge project to be built by a Chinese steel fabricator.

The contract spurred the usual condemnations from political types. U.S. Sens. Chuck Schumer and Sherrod Brown, Democrats from New York and Ohio, respectively, cried foul in an angry letter to the general contractor. Steel workers union leaders joined the chorus. Emotional calls for an "even playing field" on trade practice sounded a familiar theme.

But the chairman of the MTA issued a swift response that took me back to my children's questions about that big old plant. Seems that the MTA did attempt to locate an American source, but to no avail.

Per the MTA, "Not a single American fabricator had the capacity, the experience, and the willingness to tackle the job. ... The American steel industry has not focused on the process of fabricating orthotropic steel decks for projects of this size and complexity, while fabricators in other countries have specialized in it."

And so another (American) steel opportunity goes by the boards.

The Verrazano Narrows bridge story and the demise of Sparrows Point speak to the continuing woes of our steel sector. The contributing causes are familiar:

•Industrial era production methods were heavily labor intensive. Bethlehem Steel employed 35,000 people at its zenith in the 1940s. It was the world's largest steel mill. The well compensated (but dirty and dangerous) jobs spurred local growth, especially the development of Dundalk and Sparrows Point. But technological innovation soon made it possible to produce more steel with far less labor. Employment at Bethlehem Steel subsequently dwindled during the last two decades of the millennium. Formidable socio-economic challenges to the solid working class neighborhoods of Eastern Baltimore County soon followed.

•Unfair trade practices played their part. Dumping of heavily subsidized steel from Europe and Asia hit domestic production hard. Large scale foreign government support made it nearly impossible for once profitable sectors of the domestic industry to manufacture at competitive prices. Many of these unfair trade practices continue to this day.

•Management and labor grew fat and happy. Both acted as though the party (and profits) would never end. Until they did … with a thud. One-industry towns simply do not survive once the one industry hits the skids. (See "Detroit bankruptcy" for context.) Most U.S. steel communities have yet to recover from this economic catastrophe.

Today's headlines are depressingly familiar to this former member of Congress representing Dundalk, Maryland. Weekly, I read of yet another probe into allegations of illegal steel dumping from China, Russia, Taiwan, Ukraine or South Korea; yet another complaint filed with the International Trade Commission; yet another steel town heading toward economic ruin; yet another politician demagoguing about the "good ole days" of American steel supremacy.

But all is not lost. There is cause for optimism for a post-industrial American steel industry.

New hi-tech specialty mills are a hot commodity. And they're popping up all around the Midwestern "rust belt."

These new factories are high tech marvels. Their state-of-the-art technologies reduce carbon emissions and increase productivity. The workforce more often than not is non-union. The work weeks are shorter. Workers share in their health care premiums. And a 401(k) (rather than the old defined benefit pension) is the sole retirement vehicle offered.

Gone forever are the large blast furnaces with the small profit margins; such venues are just too capital intensive for a new age. So too are the ultra-dirty, ultra dangerous working conditions of yesteryear. That construct (which has generated thousands of tort claims in our courts) is never to return. Fortunately, this generation of American steel workers can expect to retire without the specter of environmental disease.

What emerges is a more diversified steel sector targeting viable niches such as automobiles, construction, appliances and oil and natural gas exploration, employing a computer literate and well compensated labor force.

Most importantly, the new mills are proving generally profitable. As such, they will continue to play an integral role in America's post-recession recovery. And they just might save the manufacturing backbone of the American economy to boot.

Robert L. Ehrlich Jr.'s column appears Sundays. The former Maryland governor and Member of Congress is a partner at the law firm King & Spalding, the author of "Turn this Car Around" — a book about national politics. His email is

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