Feed on

Iron and steel production is thought to be one of the least environmentally friendly industries going. A major reason for this view is that the production of these metals from raw material is extremely energy intensive, aside from the other emissions coming from the production process. The following image, from a Steel Industry Trade group (yes I am aware of bias here) shows that each ton of steel produced today uses 30% less energy than it did just 20 years ago.

If you were to push back further, you would see that instead of requiring the 12 MBtu of energy to make a ton of steel today, in 1975 producers required about 48 MBtu and back in 1955 they required 58. Or to put it another way, the energy intensity of primary steel production has improved by nearly 80 percent in the last half-century. It is worth remembering that there has been no crash program to make the steel sector “greener.” These dramatic improvements have even occurred during a time when dirty energy costs were falling in real terms (the 80s and 90s). Why, then, did such dramatic improvements occur, and why are they likely to continue to occur? Competition. The steel industry has gone global and there is also great competition from alternative building materials. Producers in a competitive system have every incentive to economize on the use of all inputs, so how come this “race to the bottom” is not widely understood? By the way, it’s a pretty good bet that the quality of steel coming out of the furnaces of today is higher than from a half-century ago, so these figures above are surely understating just how much of an improvement we have seen.

One Response to “Raising the Iron and Steel Curtain”

  1. Rod says:

    It’s continuous casting that makes the difference here. Companies like Nucor took the customers away from the vertically integrated steelmakers like Bethlehem by casting sheet steel and I-beams in the approximate thickness of the finished product. Instead of first producing a billet or bloom of steel and then sending it through a rolling mill thirty times, Nucor cast “blanks” of I-beams that only required a few finishing steps. Same for sheet steel: continuously cast a sheet that is the approximate thickness of the finished sheet steel.

    Nucor also used steel scrap for its feedstock instead of starting with iron ore. The vertically integrated steel companies claimed that you couldn’t get the metallurgy right with scrap, but they were wrong. What better way to get sheet steel for cars than to melt the cars back into steel?

    Nucor also had many fewer employees per ton of steel. Before they started to dismantle the company, Bethlehem had 33 vice presidents, and they built a skyscraper in Bethlehem, Martin Tower, that was designed to have enough corner offices for the large number of vice presidents and other management. Nucor, by contrast, had only seventeen employees at their corporate headquarters in Charlotte, in a rented building across the street from a shopping center. Their factories were in the south and midwest, where the cost of living was low, so they could pay their employees well (by local standards) while still paying less than the big steelmakers. Nucor also had a policy of not laying off employees in downturns: they would all work fewer hours, and they still got paid well by local standards.

    Another big mistake for Bethlehem was to select CEO’s from their accounting and legal departments instead of from sales and steelmaking. Thus they concentrated on begging voluntary import restraints from the federal government instead of figuring out the benefits of continuous casting.

    And of course the union had its stranglehold on Bethlehem, and management thought that prices would continue to shoot up amid the inflation of the Jimmy Carter years, so any contract, no matter how expensive, was better than having a strike.

Leave a Reply