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Andrew Carnegie still looms over the steel business


Post Date: 21 Nov 2014    Viewed: 313

The initiation of the “Carnegie Way transformation journey” by US Steel last year must have given its employees pause. Andrew Carnegie was a notorious cost-cutter who valued efficiency above all else.

But the huge American steelmaker recently opened another avenue of the Carnegie Way, a corporate realignment featuring “customer-centric” strategies.

This might seem like a given, but in the steel industry a variety of factors can strain relations with customers, so sometimes it’s not easy.

Steel may be considered a commodity—it certainly is plentiful at roughly 100 million tons produced each year in the US–but the massive nature of the enterprise brings some unique problems: The time span between customer orders and receipt of the steel is often four weeks or more; imports often provide much cheaper prices, but the wait for foreign steel is a matter of months instead of weeks; and when markets are contentious, unfair trade case filings by domestic mills can upend offshore deals.

Plus, the steel industry is the definition of heavy. One would be hard-pressed to find operations and machinery more massive, production lines as long and complicated; the output as hot, plentiful and dangerous in its molten state and as heavy and unwieldy in its finished state. Transportation of raw materials in and finished steel out can require some major logistics and securing trucks to move steel to customers can present significant challenges when the economy is strong.

Prices of steel and the raw materials needed to produce it can be volatile, and steelmaker profit margins can be slim, all complicated by the timing of purchases of inputs like iron ore and scrap against the price of steel when ordered versus the market price when delivered.

Perhaps this is why steelmakers historically have had a reputation as being autocratic, and Andrew Carnegie may be the prime example.

In Pittsburgh’s erstwhile Steel Valley, along the Monongahela River, there sits ET, the last operating integrated mill in the region. The US Steel facility was not named for the lovable movie extraterrestrial, but for Edgar Thomson, the president of the Pennsylvania Rail Road at the time the mill was built in the 1870s.

Andrew Carnegie’s goal at ET was to exploit the revolutionary Bessemer steelmaking process for the mass production of rails critical to the westward push of a growing nation.

The 3 million tons/year mill now contributes to US Steel’s sheet production. But for the purposes of connecting its history with the current expansion of the Carnegie Way, it may be instructive to note that Carnegie named the mill after the railroad chief to curry favor with the person he hoped would be its largest customer for years to come. Sometimes that’s what it takes.


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