Steel: The Small Ones

Like Texas and taxes, the U.S. steel industry—which last week announced that it expects to produce a record of more than 120 million tons this year—is usually associated with bigness. Eight dominant companies, led by U.S. Steel (nicknamed Big Steel), account for three-quarters of the nation’s output. But there is also an important Small Steel. Unlike the auto industry, which supports only four major makers, the steel industry has more than 200 producers. Their share of total production may be modest, but they are profiting by the current boom in steel and playing an important role in the economy by selling uncommon types of steel with uncommon zeal.

Drillers & Dashboards. Specialization is the secret of Small Steel’s health and survival. A few firms, such as Detroit Steel and Granite City Steel, turn out a fairly broad family of products but concentrate on selling to close-to-home markets, thus paring freight rates. Most of the smaller companies, however, prosper by producing just a few kinds of steel. By specializing in stainless steel, which sells for about seven times as much as basic grades, Pittsburgh’s highly profitable Allegheny Ludlum has become the industry’s ninth largest seller (1963 sales: $259 million), although it is only about 20th in terms of tonnage.

Lukens Steel of Coatesville, Pa., concentrates on the heavy plates used in ships and in large tanks for liquids, and Pittsburgh’s Crucible Steel has become the world’s largest manufacturer of steel for tools. Sharon Steel of Sharon, Pa., is a major producer of the strip steel that goes into office furniture and such auto parts as dashboards. Texas’ Lone Star Steel converts local ore into pipes for oilmen, boasts overnight delivery to almost any driller in the Southwest. Says Lone Star Chairman George A. Wilson: “We’ve just got to give better service than the bigger companies, and do a good job of salesmanship.”

Lean Staffs. The compact, single-plant companies, many of them years older than the giants, also pride themselves on being more flexible, can quickly change their product mix to accommodate special orders. “We can cook steel to order in 20 minutes,” says Vice President Grady L. Roark of Chicago’s Acme Steel. With lean executive staffs, the smaller companies can also reorganize in a hurry to combat tough times. Delaware’s long-ailing Phoenix Steel has been revamped in 19 months by new President Stanley Kirk, who has turned red ink to black by cutting the production force 11% and shutting down or selling off money-losing facilities.

The compact companies also have special problems, are more vulnerable to competitive setbacks than their big brothers. Like many other small firms, Northwestern Steel and Wire of Sterling, III., is feeling a profit pinch because scrap prices have jumped sharply in the past few months. A surge of imports of barbed wire and nails has hurt Peoria’s Keystone Steel, which specializes in those products. Some small steelmen complain that they have difficulty borrowing to expand and modernize, since bankers tend to favor the larger firms. But the small ones often manage to be more daring than the conservative giants, sometimes lead in technical innovation. The first basic oxygen steel furnace in the U.S., in fact, was introduced a decade ago by Detroit’s relatively small McLouth Steel.